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We are maintaining our Neutral recommendation on Windstream Corporation (WIN - Analyst Report) highlighting a strong operational base that will drive growth in business and consumer channels with the addition of high-speed Internet customers and enhanced promotional strategies. However, competitive threats, a highly leveraged balance sheet, continued access-line erosion and diminishing wholesale business keep us from becoming positive on the stock.

Why the Reiteration?

We remain optimistic that Windstream’s focus on expanding its service offerings to businesses with VoIP services, data bundles, cloud and managed services; data center co-location; fiber transport as well as increasing distribution channels will return positive results in the near term. With respect to broadband expansion, the company is targeting to enhance its coverage and increase speed in various areas.

Little Rock, Arkansas-based Windstream has adopted a number of steps to broaden its business horizon. In an attempt to expand its line-up of data centers, the company will set up a new data center at the Franklin, Tennessee campus just outside Nashville. The company will continue to invest in long-term growth initiatives such as fiber-to-the-tower (FTTT) deployment and broadband network capability to support incremental revenue.

On the flip side, Windstream faces the major risk of access lines losses that are negatively affecting its revenue in the wireline business unit. Regulatory issues coupled with the constant pressure of technology innovation and next-generation product and service offerings are the other headwinds.

We witnessed no earnings momentum for the stock over the last 30 days. The Zacks Consensus Estimates for the fourth quarter and full year 2012 are currently pegged at 13 cents and 49 cents per share, respectively. This reflects year-over-year decrease of 33.2% and 37.1% for the quarter and full year.

Other Stocks to Consider

A stock, within the wireline rural segment, worth considering is Cbeyond Inc and it carries a Zacks Rank #2 (Buy).
 

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