Altice USA, Inc. (ATUS - Free Report) reported healthy fourth-quarter 2018 results with improved subscriber trends, solid margins and growth in free cash flow.
Quarterly net income was $213.1 million or 30 cents per share compared with $2,242.5 million or $3.04 per share in the year-ago quarter. The significant decline in earnings, despite top-line improvement, was primarily due to higher income tax benefit in the year-earlier quarter. Adjusted earnings for the quarter were 31 cents per share, which comfortably beat the Zacks Consensus Estimate of 14 cents.
For full-year 2018, GAAP earnings decreased to $18.8 million or 3 cents per share from $1,493.2 million or $2.15 per share in 2017, largely due to lower income tax benefit.
Total revenues increased 4% year over year to $2,454.9 million driven by growth across all business segments. The top line, however, missed the Zacks Consensus Estimate of $2,459 million. For full-year 2018, total revenues improved to $9,566.6 million from $9,306.9 million in 2017.
Residential revenues were $1,939 million, up 2.1% year over year with improving customer trends and net additions in broadband business. Average revenue per user increased 1.9% year over year to $142.44. Business services revenues were $348 million, up 5.3% with both its Enterprise and SMB units continuing to trend well due to improved value proposition with voice and data bundles and reduced churn.
Advertising revenues totaled $162 million, up 33.2% owing to higher targeted data and analytics revenues. With in-depth reporting, measurement and analytics services, Athena – the targeted ad planning platform – has been the primary growth driver of a4, the cross-screen targeted advertising business of Altice.
Quarterly operating income improved considerably to $528.7 million from $217.1 million in the year-ago quarter mainly due to decline in depreciation and amortization charges. Adjusted EBITDA was $1,106.1 million compared with $1,035 million a year ago.
Cash Flow & Balance Sheet
Operating free cash flow for the quarter was down 2.1% to $785 million, reflecting increased investment in new fiber-to-the-home. Free cash flow increased 27% year over year in 2018 to $1,355 million. At the end of 2018, the company’s net debt was $21,441 million. Altice repurchased $259 million worth of shares in the quarter under its share repurchase plan and expects to repurchase an additional $1.5 billion worth of shares in 2019.
During the quarter, Altice simplified its organizational structure and operations by combining the Suddenlink (Cequel) and Optimum (Cablevision) businesses under a single credit silo, post the separation from Altice Europe NV. The strategic combination marks a significant milestone in the integration of the Suddenlink and Optimum businesses and aligns the corporate debt capital structure with a common strategy.
For full-year 2019, Altice anticipates revenue growth of 2.5-3% year over year. The company also reiterated its plan to expand adjusted EBITDA and cash flow margins over the medium to long term while maintaining the year-end leverage target unchanged at 4.5x to 5.0x net debt / adjusted EBITDA.
Zacks Rank & Other Stocks to Consider
Altice currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the industry include Arista Networks, Inc. (ANET - Free Report) , Plantronics, Inc. (PLT - Free Report) and TESSCO Technologies Incorporated (TESS - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista has a long-term earnings growth expectation of 20.1%. It beat earnings estimates in each the trailing four quarters, the average being 11.4%.
Plantronics beat earnings estimates thrice in the trailing four quarters, the average being 31.7%.
TESSCO Technologies delivered average positive earnings surprise of 68.4% in the trailing four quarters.
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