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Altice (ATUS) Lags Q1 Earnings & Revenue Estimates, Cuts View

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Altice USA, Inc. (ATUS - Free Report) reported unimpressive 2020 results, with the bottom and the top line missing the respective Zacks Consensus Estimate. The company’s shares declined 3.8% on May 1, closing at $24.99.

It should be noted that network investment, deployment of cable DOCSIS 3.1 and fiber technologies, has made 1 Gigabit broadband service available in more than half of the company’s New York, New Jersey and Connecticut (Optimum-branded) footprint. Altice continues to expand Gigabit service in its Suddenlink service area across Texas, Arkansas, Arizona and more than a dozen other states, where it already offers Gigabit speeds to more than 75% of households.

Bottom Line

Net loss for the March quarter was $0.9 million narrower than a loss of $25 million in the prior-year quarter. The improvement can be attributed to higher operating income, lower interest expenses, gain on derivative contracts as well as absence of loss on extinguishment of debt and write-off of deferred financing costs. The bottom line missed the Zacks Consensus Estimate by 11 cents.

Altice USA, Inc. Price, Consensus and EPS Surprise




First-quarter total revenues increased 2.2% year over year to $2,450.3 million, driven by record Broadband revenue growth of 14.2%. Residential revenues inched up 0.5%, Business Services rose 3.9%, and News and Advertising increased 11.4%. However, the top line lagged the consensus estimate of $2,464 million.

Residential revenues were $1,957.6 million, up 0.5% year over year on broadband revenue growth of 14.2%. The company saw record demand for its broadband service, achieving the best-ever quarterly performance with 50,000 broadband net additions, excluding Altice Advantage.

Moreover, the pace of broadband speed upgrades almost doubled in March month-over-month with a 24% increase in network data usage. To support this network demand, Altice has accelerated the deployment of 1-gig speeds, which is currently available in more than half of its Optimum footprint and more than 75% of the Suddenlink footprint. Revenue per customer relationship was flat year over year at $143.39.

Revenues from Business Services were $364.5 million, up 3.9% year over year with growth in Enterprise & Carrier revenues of 0.5% and SMB of 6%. News and Advertising revenues totaled $105.5 million, up 11.4% year over year. The upside was primarily driven by growth in the company’s targeted data advertising division a4 and its digital-first news business Cheddar.

Other Details

Operating income improved to $448.6 million from $442.5 million in the year-ago quarter. Adjusted EBITDA was $1,031.4 million compared with $1,032.9 million in the prior-year quarter.

In the first quarter, Altice repurchased 31,216,259 shares for an aggregate price of about $750 million, at an average price of $24.03.

Cash Flow & Liquidity

Operating free cash flow in the first quarter was up 5.7% year over year to $732.3 million, courtesy of lower capital spending. Free cash flow surged 80% year over year to $294.5 million. As of Mar 31, the company’s consolidated net debt was $22,594 million, up $448 million from the end of fourth-quarter 2019 mainly on cash spent on share repurchases in the reported quarter.

2020 Outlook Lowered

Altice expects the macroeconomic impact from the COVID-19 pandemic to affect its operations, particularly in News and Advertising, and SMB businesses. Although this lowers revenues and EBITDA visibility, the company remains confident in its ability to deliver free cash flow growth in 2020 while maintaining leverage and share repurchase targets.

Due to the uncertainty of the duration of disruptions, the company intends to provide an update to 2020 revenue growth and adjusted EBITDA margin expectations later in the year. The company currently anticipates capital expenditures to be below $1.3 billion, down from the previous range of $1.3-$1.4 billion. It projects year-end leverage target 4.5x-5.0x net debt/adjusted EBITDA. Altice expects share repurchases of $1.7 billion.

Zacks Rank & Stocks to Consider

Altice currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are Ooma, Inc. (OOMA - Free Report) , Turtle Beach Corporation (HEAR - Free Report) and Plantronics, Inc. . While Ooma sports a Zacks Rank #1 (Strong Buy), Turtle Beach and Plantronics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ooma has a trailing four-quarter positive earnings surprise of 124%, on average.

Turtle Beach has a trailing four-quarter positive earnings surprise of 112.5%, on average.

Plantronics has a trailing four-quarter positive earnings surprise of 27.7%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

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