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Frontier Communications (FTR) Up 11.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Frontier Communications (FTR - Free Report) . Shares have added about 11.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Frontier Communications due for a pullback? 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 catalysts.

Frontier Communications Incurs Q2 Loss, Revenues Lag

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

Top-Line and Bottom-Line Results

Frontier Communications reported an adjusted loss of 80 cents per share in the second quarter. Notably, the reported figure was narrower than the Zacks Consensus Estimate of a loss of 83 cents. Also, it was narrower than the loss of $1.10 per share incurred in the year-ago quarter.

In the reported quarter, revenues came in at $2,162 million, which lagged the Zacks Consensus Estimate of $2,171 million. Also, the top line was lower than the year-ago tally of $2,304 million.

Segmental Details

Revenues in the Customer segment were $2,065 million in the reported quarter, down 1.9% year over year.

Subsidy and other regulatory segments revenues came in at $97 million, down 51% year over year.

Costs and Margins

Selling, general and administrative expenses came in at $460 million, down from $531 million recorded a year ago. Total operating expenses came in at $1,795 million, down from $2,679 million. Operating income was $367 million against an operating loss of $375 million in the prior-year quarter.

Operating margin was 17%. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expanded 110 basis points in the quarter to 40.9%.

Balance Sheet and Cash Flow

Exiting the second quarter, Frontier Communications had cash and cash equivalents of $384 million, up from $362 million as of Dec 31, 2017. Long-term debt summed $16,209 million, down from $16,970 million recorded at the end of 2017.

For the first six months of 2018, Frontier Communications generated $923 million cash from operating activities, higher than $829 million in the year-ago period. Total capital expenditure was $321 million compared with $263 million recorded in the prior-year quarter.

Outlook

For 2018, Frontier Communications continues to expect operating free cash flow to be around $800 million. Capital expenditures are expected to be in the range of $1,000-$1,150 million. Cash interest expenses are anticipated to be around $1.5 billion. The company expects to secure adjusted EBITDA of roughly $3.6 billion in 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Frontier Communications has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 value, growth, and momentum investors.

Outlook

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




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