Frontier Communications Corp. FTRreported mixed third-quarter 2015 financial results. Earnings managed to beat the Zacks Consensus Estimate while revenues lagged the same.
On a GAAP basis, net loss in the reported quarter was $14 million or a loss of a penny per share compared with a net income of $42 million or earnings of 4 cents per share in the prior-year quarter. However, adjusted earnings per share of 3 cents in the third quarter surpassed the Zacks Consensus Estimate of a loss of a penny. Earnings were, however, declined a substantial 40% year over year.
Total revenue improved 24.8% year over year to $1,424 million but missed the consensus mark of $1,427 million. Voice revenues came in at $500 million, up 5.93%. Data & Internet revenues were $589 million, up 25.58%. Other revenues totaled $134 million, up a whopping 76.3%. Revenues from Switched access and subsidy totaled $201 million, up 62% from the year-ago quarter. Segment-wise, Residential revenues were $606 million, up 21.7% year over year whereas Business revenues came in at $617 million, up 18.9%.
Operating Income
Operating income in the third quarter increased 5% year over year to $207 million. Operating income margin was 14.6% compared with 17.3% in the year-ago quarter. Quarterly operating expenses were $1,217 million, up 28.9% year over year.
Cash Flow
In the quarter under review, Frontier Communications generated $588 million of adjusted cash from operations compared with $480 million in the prior-year quarter. Adjusted free cash flow in the quarter was $151 million compared with $149 million in the third quarter of 2014.
Liquidity
Frontier Communications exited the third quarter with $1,011 million of cash and cash equivalents compared with $682 million at 2014-end. Long-term debt increased to $16,016 million at the end of the reported quarter from $9,486 million at the end of 2014. At the end of the third quarter of 2015, the debt-to-capitalization ratio was 0.73 as against 0.72 at the end of 2014.
Subscribers Statistics
As of Sep 30, 2015, the number of residential customers declined 0.88% to 3,147,000. The average monthly residential revenue per customer was $63.83 compared with $60.34 in the year-ago quarter. Business subscriber count decreased 1.67% year over year to 294,000. The average monthly business revenue per customer was $693.58 against $658.56 in the prior-year quarter. As of Sep 30, 2015, Frontier Communications had 2,434,000 high-speed broadband subscribers and 560,000 video customers. In the reported quarter, the company gained 27,200 high-speed broadband subscribers but lost 9,600 video users.
Outlook
The company projects free cash flow in the range of $825 million to $865 million for 2015, up from the previous estimate of $785 million to $825 million. Also, Frontier Communications forecasts capital expenditure from business operations between $700 million and $750 million, up from the prior estimate of $650 million to $700 million.
Zacks Rank & Stocks to Consider
Frontier Communications currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include AT&T Inc. T, CenturyLink Inc. CTL and Windstream Holdings Inc. WIN. All the three stocks currently carry a Zacks Rank #2 (Buy).
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