It has been about a month since the last earnings report for Cincinnati Bell Inc. (CBB - Free Report) . Shares have lost about 6.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Cincinnati Bell Misses Q4 Earnings, Revenue Estimates
On a GAAP basis, quarterly net loss came in at $3.9 million or a loss of $0.09 per share compared with net income of $30 million or $0.71 in the year-ago quarter. However, quarterly adjusted (excluding special items) earnings per share of $0.01 lagged the Zacks Consensus Estimate of $0.03.
Quarterly total revenue was $285.3 million, down 4% year over year and also below the Zacks Consensus Estimate of $305.3 million.
Operating income was $10.5 million, down a substantial 58% year over year owing to restructuring and severance related charges. Meanwhile, adjusted EBITDA (earnings before interest, depreciation and amortization) increased 4.7% year over year to $74.2 million in the reported quarter. EBITDA margin was 26% compared with 25% in the prior-year quarter.
In fourth-quarter 2016, Cincinnati Bell generated $27.4 million of cash from operating activities compared with $16.2 million in the prior-year quarter. Quarterly free cash flow was a negative $71.8 million compared with a negative $55.9 million in the year-ago quarter.
Cincinnati Bell ended 2016 with cash and cash equivalents of $9.7 million compared with $14.8 million at the end of 2015. Net debt at quarter-end was $1,196.9 million compared with $1,230.2 million at 2015-end.
Entertainment and Communications revenues rose 3% year over year to $193 million owing to a 23% rise in video revenues. The increase was partially neutralized by a 29% decline in services & other revenues.
IT Services and Hardware revenues decreased 9% year over year to $95.5 million. The downside was due to a 23% decline in telecom & IT hardware revenues, partially mitigated by a 37% rise in cloud services revenues.
At the end of 2016, Cincinnati Bell had 0.2013 million residential voice lines, down 7.6% year over year and 0.3224 million business voice lines, up 5.7% year over year. Long distance lines were 0.3173 million, down 6.6%. DSL Internet subscribers were 0.1056 million, down 21%. Fioptics Internet customers were 0.1976 million, up 28.6%. Fioptics video subscribers were 0.1376 million, up 20.3% year over year.
Cincinnati Bell expects revenues and adjusted EBITDA at approximately $1.2 billion and $295 million (plus or minus 2%), respectively, in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two downward revisions higher for the current quarter compared to one upward. In the past month, the consensus estimate also shifted downward by 93.3% due to these changes.
At this time, Cincinnati Bell's stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The stock is suitable solely for value based on our styles scores.
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicate a downward shift. Notably, the stock hase a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.