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Why Is Windstream (WIN) Down 43.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Windstream Holdings (WIN - Free Report) . Shares have lost about 43.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Windstream 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 catalysts.

Windstream Q3 Loss Narrower Than Estimated, Revenues Decline

Windstream reported lackluster third-quarter 2018 results with lower revenues and narrower loss on a year-over-year basis.

Net Loss

For the third quarter, the company GAAP earnings of $41.3 million or 97 cents per share against a net loss of $101.5 million or a loss of $2.76 per share in the year-ago quarter. Excluding debt extinguishing charges, adjusted loss for the quarter was $2.57 per share, which was narrower than the Zacks Consensus Estimate of a loss of $2.58.

Revenues

Quarterly total revenues decreased 5% year over year to $1,420.6 million. The top line, however, missed the Zacks Consensus Estimate of $1,425 million. Service revenues decreased 5% to $1,400.1 million. Consolidated margin of 34.9% improved 220 basis points driven by strong expense management initiatives. Product sales were down 19% to $20.5 million.

Other Quarter Details

Windstream added 8,400 broadband customers in the third quarter, which represents one of the strongest residential subscriber growths in years, due to deployment of faster broadband speeds across the rural footprint. The company expects to double the availability of 100 Mbps Internet service to 30% of the households in its markets by the end of March 2019.

Total costs and expenses were $1,345 million, down 8% year over year. Operating income came in at $75.6 million compared with $41.2 million in the prior-year quarter. Adjusted OIBDAR came in at $495.7 million compared with $490.3 million in the year-ago quarter. Adjusted OIBDA was $331.5 million compared with $327 million in the year-ago quarter.

Segmental Performance

Consumer & Small Business: Total revenues were $466.4 million, down 4% year over year. Of the total, Service revenues were $458.9 million and product sales were $7.5 million. Segment income was $266.1 million, down 1% year over year.

Enterprise: Total revenues were $729.1 million, down 5% year over year. Of the total, Service revenues were $716.5 million and product sales were $12.6 million. Segment income was $160.9 million, up 9%.

Wholesale: Total revenues came in at $181.1 million, down 5% year over year. Segment income was $126.6 million, down 5%.

Consumer CLEC: Revenues totaled $44 million compared with $52 million in the year-ago quarter. The segment’s income remained almost flat at $24.9 million.

Cash Flow

In the first nine months of 2018, Windstream generated $756.2 million of cash from operations compared with $646.6 million in the prior-year period. Adjusted free cash flow for the first nine months of the year was $162.1 million.

Liquidity

As of Sep 30, 2018, the company had $37.3 million of cash and cash equivalents with $5,721.3 million of long-term debt.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -7.99% due to these changes.

VGM Scores

Currently, Windstream has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.

Outlook

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




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