On Sep 7, we issued an updated research report on Telecom service provider, Cincinnati Bell Inc. (CBB - Free Report) .
Cincinnati Bell continues to experience erosion in high margin local access lines. With Digital Subscriber Line and cable modems gaining widespread acceptance, customers are deactivating the extra phone lines that were used to access the Internet via dial-up modem.
In addition, the company is confronting competitive threats from local cable operators that aggressively deploy local phone service besides television. This has already resulted in the loss of major business customers. Moreover, improved housing market in Greater Cincinnati has led residents to switch homes, thus increasing multi-tenant Fioptics churn.
Going forward, intense competition in this Zacks Rank #4 (Sell) company’s operational region can be a drag on its pricing power, which might induce downward pressure on its margins.
In the second quarter of 2017, the company reported lower-than-expected earnings per share. Quarterly adjusted earnings per share were 7 cents (excluding special items), which missed the Zacks Consensus Estimate by a penny.Operating income was $20.9 million compared with $27.4 million in the year-ago quarter.
Markedly, the company has an unimpressive earnings history. Also, it has failed to outpace the Zacks Consensus Estimate in three of the last four quarters.
Furthermore, Cincinnati Bell faced opposition to its Local Area Service discontinuation within the Kentucky region, from consumers and industry groups, citing concerns over the shutdown of plain old telephone service. CenturyLink Inc. (CTL - Free Report) and Windstream Holdings, Inc. (WIN - Free Report) also faced similar issues from consumers and clients regarding their requests to liquidate Frame Relay and small to medium-sized business digital subscriber line services.
Though shares of Cincinnati Bell have gained 5.4% it failed to beat the industry’s growth of 6.8%, over the last six months.
Stock to Consider
Investors interested in the broader Utilities sector may consider TELUS Corp. (TU - Free Report) holding a Zacks Rank #2 (Buy). Moreover, the company projects earnings per share growth rate of 8% over the next three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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