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Why Is Frontier Communications (FTR) Down 5.8% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Frontier Communications Corporation (FTR - Free Report) . Shares have lost about 5.8% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is FTR due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Frontier Reports Narrower-Than-Expected Loss in Q1

Frontier Communications reported a narrower-than-expected loss in first-quarter 2018.

Top- and Bottom-Line Results

Frontier Communications reported an adjusted loss of 58 cents per share in the first quarter. The reported figure was narrower than the Zacks Consensus Estimate of a loss of 83 cents. It also came in narrower than the loss of $1.20 per share posted in the year-ago quarter.

Revenues in the reported quarter came in at $2,199 million, surpassing the Zacks Consensus Estimate of $2,192 million. However, the top line was lower than the year-ago tally of $2,356 million.

Segmental Details

Revenues in the Customer segment were $2,102 million in the reported quarter, down 2.6% year over year.

Subsidy and other regulatory segments revenues in the first quarter came in at $97 million, tanking 50.8% year over year.

Costs and Margins

Selling, general and administrative expenses came in at $469 million, down from $542 million recorded in the year-ago tally. Total operating expenses came in at $1,833 million, down from $2,039 million recorded in the prior-year quarter. Operating income in the reported quarter was $366 million, up 15.5% year over year.

Operating margin was 16.6%, up 310 basis points (bps) year over year. Adjusted Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expanded 160 bps in the quarter to 41.3%.

Balance Sheet and Cash Flow

Exiting the first quarter, Frontier Communications had cash and cash equivalents of $201 million, down from $362 million recorded as of Dec 31, 2017. Long-term debt summed $16,470 million, slightly down from $16,970 million recorded at the end of 2017.

In the first three months of 2018, Frontier Communications generated $251 million cash from operating activities, lower than $300 million secured in the year-ago quarter. Total capital expenditure in the reported quarter was $297 million, as against $316 million recorded in first-quarter 2017.

Outlook

Frontier Communications intends to widen its market share on the back of superior customer relationships. Rise in strength of subscribers from niche end-markets, like California, Florida and Texas, is expected to drive the company’s top-line performance, going forward. It also remains on track to improve its liquidity and strengthen the balance sheet.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to three lower. In the past month, the consensus estimate has shifted by -6.14 % due to these changes.

VGM Scores

At this time, FTR has a great Growth Score of A and a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for growth and momentum investors while value investors may want to look elsewhere.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, FTR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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