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What's in Store for Windstream (WIN) this Earnings Season?

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Leading local exchange carrier in the U.S., Windstream Holdings Inc. (WIN - Free Report) , is slated to report third-quarter 2016 financial numbers before the opening bell on Nov 7.

Last quarter, the company posted a positive earnings surprise of 32.56%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in all of the previous four quarters, with an average beat of 138.00%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

Windstream is well positioned for long-term growth based on its investments in fiber-to-the tower, broadband networks and proper cost management. The company’s new cloud-to-cloud disaster recovery management solutions replicate mission-critical virtual servers and data to provide an alternative system for cloud-based disaster recovery system to customers. Windstream strengthened its existing tie-up with Cologix through the construction of two new PoPs – in Dallas, TX and Columbus, OH. Also, recent expansion of its metro fibre network business in Atlanta, Minneapolis and Chicago bodes well. The company also aims to deliver broadband speeds of up to 1 gigabit per second (Gbps) with the help of the merged Calix Inc.’s (CALX - Free Report) E3-16F G.fast sealed DPU nodes and GigaFamily products. Windstream’s strategic moves to boost sales, cut costs and pricing plans should drive revenues and margins.

In Sep 2016, Windstream announced that its $250 million Project Excel program launched in 2015 is in progress and is expect to close by the end of 2016. This project was started to enhance the network provision of the company by installing VDSL2 (Very-high-bit-rate digital subscriber line 2) network equipment and lure in more customers by 2017 by delivering higher broadband speeds of upto 100 Mbps.

On the flip side, Windstream has been losing access lines due to pricing pressure and fierce competition. The company also remains under pressure with losses in the wholesale business. The implementation of stringent regulatory measures by the FCC compels companies like Windstream to cut rates for customers. Further, continuous investments in technology and network upgrades may dent the company’s earnings. Windstream’s highly leveraged balance sheet is another major concern.

Earnings Whispers

Our proven model does not conclusively show that Windstreamis likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Windstream has an Earnings ESP of -41.03%. This is because the Most Accurate estimate stands at a loss of 55 cents while the Zacks Consensus Estimate is pegged at a loss of 39 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Windstream has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

WINDSTREAM HLDG Price and EPS Surprise

 

WINDSTREAM HLDG Price and EPS Surprise | WINDSTREAM HLDG Quote

Key Picks

Here are some companies that have the right combination of elements to post an earnings beat this quarter.

Verizon Communications Inc. (VZ - Free Report) , with an Earnings ESP of +1.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here. The company’s earnings beat the Zacks Consensus Estimate in three of the previous four quarters.

Microsoft Corporation (MSFT - Free Report) , with an Earnings ESP of +1.30% and a Zacks Rank #3.The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters.

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