Zayo Group Holdings, Inc. (ZAYO - Free Report) recently secured a contract from an unnamed global media firm to augment its network capabilities among two key production hubs in Europe. Per the deal, the company will offer high bandwidth connectivity between the two sites to meet the low latency needs of its customer.
In particular, Zayo will extend its network reach to Hilversum Media Park in Amsterdam, which is home to various national, European and global media companies. In addition, the company will upgrade its network connectivity in Rotterdam, the second largest city in the Netherlands and a key hub for the logistics and petrochemical industry. This, in turn, will help the client firm to generate superior content through improved network connectivity.
Zayo is well poised to benefit from a diversified blue-chip customer base that comprises the largest and most sophisticated users of bandwidth. It aims to grow the network business at 5% and beyond while controlling expenses to boost OpEx efficiency. The company emphasizes on less than 12-month payback deals while leaning into strategic investments like e-rate deals, mobile infrastructure and long-haul fiber. Such deals leverage its existing assets in conjunction with new builds. These are likely to deliver strong free cash flow yields and attractive returns on invested capital.
Notably, the company recorded better-than-expected fourth-quarter fiscal 2019 results, wherein both the bottom and the top line surpassed the Zacks Consensus Estimate. Net income for the June quarter was $63 million or 26 cents per share, beating the Zacks Consensus Estimate by 11 cents. Quarterly revenues of $650.6 million surpassed the consensus estimate of $647 million.
Management remains bullish about the prospects of its largest business segment, Fiber Solutions, as it is witnessing a very strong deal momentum. We also are impressed with the inherent growth potential of this Zacks Rank #3 (Hold) company.
Year to date, the stock has outperformed the industry with an average return of 48.4% compared with the 20.1% rally of the latter.
Some better-ranked stocks in the industry are Anterix Inc. (ATEX - Free Report) , Superconductor Technologies Inc. (SCON - Free Report) and Nokia Corp. (NOK - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Anterix surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 7%.
Superconductor Technologies surpassed earnings estimates twice in the trailing four quarters, the average positive surprise being 12.7%.
Nokia surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 89.3%.
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