Will Frontier Communications (FTR) Miss Q3 Earnings?

Frontier Communications Corporation (FTR) is slated to release its third-quarter 2014 results on Nov 3, after market close.

Last quarter, the company’s earnings barely managed to meet the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.

Factors Likely to Influence This Quarter

We believe new product deployment, broadband expansion and cash flow management through reduced operating expenses should drive Frontier Communications’ revenues higher in the coming quarters. Moreover, changes in the channel distribution structure and Frontier’s deeper focus on infrastructural development, augmentation of network speed and shareholder returns augur well for long-term growth.

On the flip side, backhaul revenue pressure, integration cost, higher financial leverage as well as intense competition may act as headwinds for Frontier Communications, going forward. Additionally, reduction in residential customers and increased churn rate may hamper the company’s earnings in the third quarter.

Earnings Whispers?

Our proven model does not conclusively show that Frontier Communications is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, that is not the case here as elaborated below:

Negative Zacks ESP: Frontier Communications has an earnings ESP of -25.00%. This is because the Most Accurate estimate stands at 3 cents while the Zacks Consensus Estimate is pegged higher at 4 cents.

Zacks Rank: Frontier Communications’ Zacks Rank #3 (Hold) increases the predictive power of ESP. Nevertheless, we need to have a positive ESP to be confident of an earnings surprise.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions

Stocks to Consider

Here are some companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Lumos Networks Corp. (LMOS) has an earnings ESP of +15.39% and carries a Zacks Rank #2 (Buy).

Ruckus Wireless, Inc. (RKUS) has an earnings ESP of +60.00% and carries a Zacks Rank #3.

CenturyLink, Inc. (CTL) has an earnings ESP of +1.61% and a Zacks Rank #3.

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