Telecom services provider Cincinnati Bell Inc. (CBB) is slated to release its third-quarter 2014 results on Nov 5, before the opening bell.
Last quarter, the company’s earnings missed the Zacks Consensus Estimate by a margin of 100.00%. Let’s see how things are shaping up for this announcement.
Factors Likely to Influence This Quarter
Cincinnati Bell continues to experience erosion in high margin local access lines. Moreover, the carrier is winding up its wireless operations, which remains highly challenged on account of competition from large national carriers. The company is lagging strong national players in the construction of 4G network as well as in speed, which leads to potentially increased customer churn. Apart from removing a recurring revenue stream, the closure will also impact the company’s 2014 cash balance.
Moreover, the company is currently faced with a number of lawsuits, actions, proceedings, claims and other matters. We are apprehensive that the company’s reputation and finances might be hampered if verdicts in these cases go against it.
However, monetization of CyrusOne investments and divestment of the wireless spectrum will transform Cincinnati Bell primarily into an entertainment, communication and IT solutions company. The company’s wireline segment remains its prime growth driver based on a strong Fioptics business.
Earnings Whispers?
Our proven model does not conclusively show that Cincinnati Bell 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, this is not the case here as elaborated below.
Zacks ESP: Cincinnati Bell has an earnings ESP of -125.00%. This is because the Most Accurate estimate stands at a loss of 9 cents while the Zacks Consensus Estimate is pegged at a loss of 4 cents.
Zacks Rank: Cincinnati Bell has a Zacks Rank #5 (Strong Sell). 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 a Zacks Rank #2 (Buy).
DragonWave Inc. (DRWI) has an earnings ESP of +16.67% and a Zacks Rank #3 (Hold).
CenturyLink, Inc. (CTL) has an earnings ESP of +1.61% and a Zacks Rank #3.
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