A month has gone by since the last earnings report for Cincinnati Bell . Shares have added about 13.1% 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 its most recent earnings report in order to get a better handle on the important drivers.
Cincinnati Bell Reports Wider-Than-Expected Loss in Q4
Cincinnati Bell reported tepid fourth-quarter 2019 results, wherein the top line declined year over year but GAAP net loss narrowed. In addition, the company missed both the top- and bottom-line estimates.
On a GAAP basis, net loss for the December quarter was $23.2 million or loss of 46 cents per share compared with net loss of $32.6 million or loss of 65 cents per share in the year-ago quarter. The improvement was primarily due to higher income tax expenses in the year-earlier quarter.
Non-GAAP net loss was $10.9 million or loss of 22 cents per share compared with net loss of $27.8 million or loss of 65 cents per share in the prior-year quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 21 cents.
In full-year 2019, GAAP net loss was $77 million or loss of $1.53 per share compared with net loss of $80.2 million or loss of $1.73 per share a year ago. Non-GAAP net loss totaled $57 million or loss of $1.13 per share compared with net loss of $51.6 million or loss of $1.11 per share in 2018.
Quarterly revenues fell 8.6% year over year to $390.4 million, primarily due to lower revenues in both operating segments owing to challenging macroeconomic environment. The top line missed the consensus estimate of $392 million. Revenues in full-year 2019 were $1,536.7 million, up from $1,378.2 million in 2018.
Revenues from Entertainment and Communications declined 2.2% year over year to $246.4 million, with Cincinnati contributing $168.5 million and Hawaii $77.9 million. Customers transitioning away from lower margin linear video programming to over-the-top solutions resulted in revenue decrease in both the markets. Adjusted EBITDA was $89.6 million, down 1.1% from year-ago quarter.
IT Services and Hardware revenues were $150.4 million compared with $153.9 million in the year-ago quarter. Adjusted EBITDA was $18.6 million in the fourth quarter, down 5.6% year over year.
Overall operating income was $15.3 million compared with $24.4 million in the year-ago quarter, due to lower revenues. Adjusted EBITDA declined 4.6% to $102.6 million.
Cash Flow & Liquidity
In 2019, Cincinnati Bell generated $259.1 million of cash from operating activities compared with $214.7 million in 2018. As of Dec 31, 2019, the regional telephone company’s non-GAAP net debt totaled $1,912 million compared with $1,914.4 million a year ago.
During the quarter, Cincinnati Bell inked an agreement to be acquired by Toronto-based conglomerate, Brookfield Infrastructure Partners, at approximately $2.6 billion. Per the deal, the shareholders will be entitled to receive $10.50 in cash for each outstanding share. Subject to certain regulatory and shareholder approvals, the much-awaited transaction is expected to close by the end of 2020. The deal will help the company to deliver flexible data, video, voice and IP solutions with enhanced network coverage and broadband speed to customers primarily based in Ohio, Indiana, Kentucky and Hawaii, thereby improving its overall financial condition.
Cincinnati Bell is focused on transforming itself from a legacy copper-based telecommunications company to a technology company with contemporary fiber assets servicing both consumer and business customers with flexible data, video, voice and IP solutions. With a well-designed marketing program, popular brand value and strong reputation of offering high-quality service, the company expects to increase its Entertainment and Communications revenues. Also, the expansion of its geographic footprint in IT services has brought enhanced scale and client diversification, supporting its transformation to a hybrid IT solutions provider.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
Currently, Cincinnati Bell has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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.
Cincinnati Bell has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.