It has been about a month since the last earnings report for Altice USA (ATUS - Free Report) . Shares have lost about 1.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Altice USA 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.
Altice Beats Q3 Earnings Estimates on Record Margins
Altice reported all-time best results in third-quarter 2018 with healthy year-over-year increase in earnings and revenues, driven by improved subscriber trends, highest ever margin and higher free cash flow.
Quarterly net income was $32.6 million or 4 cents per share against a net loss of $192.6 million or loss of 26 cents per share in the year-ago quarter. The radical improvement was mostly driven by higher revenues and lower depreciation and amortization charges. The reported earnings comfortably beat the Zacks Consensus Estimate of loss of 4 cents.
Total revenues increased 4.1% year over year to $2,417.8 million driven by growth across all business segments and beat the Zacks Consensus Estimate of $2,401 million.
Residential revenues were $1,945.9 million, up 2.4% year over year with improving customer trends and net additions in broadband business. Average revenue per user increased 2.3% year over year to $143. Business services revenues were $344.2 million, up 6% with both the Enterprise and SMB units continuing to trend well, due to improved value proposition with voice and data bundles and reduced churn.
Advertising revenues totaled $123.1 million, up 37.8% owing to higher targeted data and analytics revenues. During the quarter, its cross-section advertising firm a4 launched Athena, a new self-serve client application for end-to-end multi-screen campaign management with “one-stop shopping” for advertisers. With in-depth reporting, measurement and analytics services, Athena has become the primary growth driver of a4.
Quarterly operating income improved significantly to $505.6 million from $120.6 million in the year-ago quarter mainly due to decline in depreciation and amortization. Adjusted EBITDA was $1,070.5 million compared with $1,012.3 million in the prior year.
Cash Flow & Balance Sheet
Operating free cash flow for the quarter was down 2.8% to $736 million, reflecting increased investment in new fiber-to-the-home. Free cash flow increased 28.0% year over year in the quarter to $276 million, bringing the year-to-date figure to $937 million, up 66.4%. At the end of third-quarter 2018, the company’s net debt was $21,562 million.
For full-year 2018, Altice continues to anticipate revenue growth of 2.5-3% year over year. The company also reiterated the plan to expand its adjusted EBITDA and cash flow margins, over the medium to long term.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 616.67% due to these changes.
Currently, Altice USA has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Altice USA has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.