Windstream Holdings, Inc. (WIN) is poised for long-term growth based on its investments in fiber-to-the tower and broadband networks along with proper cost management. Going forward, we expect the company to deliver solid results in its enterprise segment by offering robust solutions combined with a customized approach. Further, enhancement of its long haul network and expansion of data centers bode well for the company.
In Dec 2014, Windstream Holdings won a five-year multimillion-dollar contract from the National Weather Service (NWS). Per the deal, Windstream will provide regional NWS Weather Forecast Offices (WFO), situated all over the country, with high-speed Internet connectivity by deploying its Layer 2 Ethernet services.
Prior to that, in November, in a move to bolster its bottom line, Windstream streamlined costs through job retrenchment activities, cutting 350 positions across several departments. We believe the company’s top line now stands to benefit on the back of the multimillion-dollar contract from NWS.
Of late, Windstream has adopted multiple steps to expand its business horizon. The company has been adding a number of data centers, employing efficient sales people to boost the sales figure and render greater customer satisfaction, and investing in business channel.
On the flip side, wireless competition has reduced the company’s access lines, and has resulted in pricing pressure in the industry. As wireless carriers continue to expand and improve their network coverage while lowering their prices, customers are increasingly opting out of traditional wireline phone service and instead relying solely on wireless service. This trend is expected to continue, thereby negatively affecting the number of served access lines at Windstream.
As a local exchange carrier, Windstream is subject to rules set by the Federal Communications Commission (FCC) as well as state regulations. This limits the prices and rates that the company can charge from its customers. In 2011, the FCC reformed its USF and inter-carrier compensation (fees that carriers pay each other when they connect telephone calls) rules.
The FCC had also highlighted its efforts to expand high-speed Internet services to rural areas over a period of six years (2012–2018). It will reduce access and compensation rates charged by Windstream during these six years, resulting in a significant decline in the company’s access revenues.
Windstream currently has a Zacks Rank #4 (Sell).
Key Picks in the Sector
Some better-ranked stocks that are worth considering in this sector are Aruba Networks, Inc. (ARUN), InterDigital, Inc. (IDCC) and ViaSat Inc. (VSAT). All these stocks sport a Zacks Rank #1 (Strong Buy).
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