A month has gone by since the last earnings report for Cincinnati Bell (CBB - Free Report) . Shares have added about 10.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cincinnati Bell due for a pullback? 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 catalysts. <p style="text-align: justify;"><strong><u>Cincinnati Bell Reports Wider-Than-Expected Loss in Q2</u></strong></p><p style="text-align: justify;">Cincinnati Bell reported disappointing results in the second quarter of 2018, wherein both the top line and the bottom line missed the Zacks Consensus Estimate. On a GAAP basis, quarterly net loss came in at $16.4 million or 39 cents per share compared with net loss of $0.3 million or 1 cent per share in the year-ago quarter. The deterioration in the bottom line despite top-line growth was primarily due to higher operating expenses and increased interest costs related to the financing of the merger with Hawaiian Telcom. Quarterly adjusted (excluding special items) loss per share was 19 cents, wider than the Zacks Consensus Estimate of loss of 13 cents.</p><p style="text-align: justify;">Quarterly total revenues of $296.8 million were up 14.4% year over year driven by continued solid demand of fiber-based products as well as inorganic growth. However, the figure lagged the Zacks Consensus Estimate of $298 million. Operating income was $20.2 million compared with $24.4 million reported in the year-ago quarter. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased $2.3 million year over year to $80.1 million in the reported quarter. However, adjusted EBITDA margin was 27% compared with 30% in the year-ago quarter.</p><p style="text-align: justify;"><strong>Segmental Results</strong></p><p style="text-align: justify;"><strong>Entertainment and Communications </strong>revenues declined 3.9% year over year to $173.9 million. The fall was primarily due to the completion of a onetime fiber build in the year-ago quarter. This was partially offset by a 11% year-over-year increase in Fioptics revenues.</p><p style="text-align: justify;"><strong>IT Services and Hardware </strong>revenues increased 51.3% year over year to $128.3 million. However, there was a sharp 49% rise in operating costs and expenses, resulting in the operating loss of $0.2 million. This compares favorably with operating loss of $1.5 million in the year-ago quarter.</p><p style="text-align: justify;"><strong>Balance Sheet & Cash Flow</strong></p><p style="text-align: justify;">Total cash provided by operating activities was $89.9 million for the first six months of 2018 compared with $122.9 million in the prior-year period. Cincinnati Bell exited the quarter with total cash and cash equivalents of $396.8 million compared with $58.2 million in the prior-year quarter. Total debt at the quarter end was $1,744.1 million.</p><p style="text-align: justify;"><strong>Notable Developments</strong></p><p style="text-align: justify;">In July, the company completed the acquisition of Hawaiian Telcom Holdco, Inc. The merger takes Cincinnati Bell a step forward toward expanding its portfolio of next-generation fiber offerings and securing fiber density value for customers and shareholders. It positions the company at the forefront of innovation in telecommunications and establishes a platform for future growth.</p><p style="text-align: justify;"><strong>Outlook</strong></p><p style="text-align: justify;">Cincinnati Bell has revised its earlier guidance for 2018, reflecting expected contributions from Hawaiian Telcom in the second half of 2018. Notably, the company currently expects revenues to be between $1,375 million and $1,460 million, and adjusted EBITDA in the range of $363-$379 million.</p>
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -166.67% due to these changes.
At this time, Cincinnati Bell has a subpar Growth Score of D, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Cincinnati Bell has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.