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Cincinnati Bell (CBB) Q2 Earnings: What's in the Cards?

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Telecom service provider, Cincinnati Bell Inc. (CBB - Free Report) is expected to report second-quarter financial numbers on Aug 4, before market opens.

Last quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 75%. Cincinnati Bell has failed to outpace estimates in two of the past four quarters, with an average earnings miss of 10.42%.

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

Factors to Consider

The price performance of Cincinnati Bell has not been impressive over the past three months. The stock has lost 2.6% against the industry’s gain of 3.3%.

Continuous erosion in local access lines, heavy capital expenditure, legal hurdles, and a weakening cash and liquidity position are headwinds for the company. Cincinnati Bell faced opposition from consumers and industry groups in its Local Area Service (LAS) discontinuation within the Kentucky region, citing concerns over the shutdown of POTS (Plain Old Telephone Services). CenturyLink Inc. (CTL - Free Report) and Windstream Holdings, Inc. (WIN - Free Report) have faced similar issues from consumers and clients regarding their requests to liquidate Frame Relay and small-to-medium-sized business digital subscriber-line services.

However, the company’s efforts to transform itself from a legacy copper-based telecommunications company to an IT firm with contemporary fiber assets are commendable.  Recently, Cincinnati Bell announced that it will buy Hawaiian Telcom Inc. and OnX Enterprise Solutions for $650 million and $201 million, respectively, in order to expand its network and enterprise IT services. The company will have 14,000 miles of fiber once the deals have been completed.

Introduction of MyTV through Cincinnati Bell’s Fioptics high-speed internet service bodes well. The company plans to continue investing in Fioptics networks to enhance customer experience. This move will improve ARPU (average revenue per user) and enable it to check consumer churn rate.

Offering of eero Inc’s whole-home Wi-Fi system at its retail stores should help Cincinnati Bell expand its FTTH (fiber to the home) customer base. Its efforts to boost its unified communications and cloud services by inking different deals look impressive.

Earnings Whispers

Our proven model does not conclusively show that Cincinnati Bell is likely to beat on earnings 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. That is not the case here, as you will see below.

Zacks ESP: CincinnatiBell has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 9 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cincinnati Bell has a Zacks Rank #2. However, the company’s 0.00% ESP makes surprise prediction difficult.

 

Cincinnati Bell Inc Price and EPS Surprise

 

Cincinnati Bell Inc Price and EPS Surprise | Cincinnati Bell Inc Quote

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

Key Pick                        

NewJersey Resources Corporation (NJR - Free Report) from the Zacks categorized broader Utilities sector has the right combination of elements to post an earnings beat when it expectedly reports third-quarter 2017 results on Aug 2. The company has an Earnings ESP of +700% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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