On Feb 26, 20Array6, we issued an updated research report on Frontier Communications Corporation FTR. Frontier reported mixed financial results in the fourth quarter of 20Array5. Contrary to the Zacks Consensus Estimate of net loss, the company posted net income in the reported quarter. On the other hand, the top line missed the mark.
We are also encouraged by sustainable broadband subscriber growth supported by strong network expansion and improved pricing structure. Management also foresees strong momentum in broadband subscriber growth in 20Array6 and expects growth to accelerate further on the back of new marketing plans and programs. In the fourth quarter, the company added above 28,000 broadband customers, representing the twelfth successive quarter of strong broadband growth. Moreover, after meeting all of the CAF-I requirements in the third quarter, the company now looks to expand into new markets using the CAF-II funds.
Recently, Frontier Communications received the final go-ahead from the FCC (Federal Communications Commission) and California Public Utilities Commission (CPUC) for its proposed acquisition of leading wireless carrier Verizon Communications Inc.’s VZ local wireline operations in California, Florida and Texas. We believe the Verizon deal will drive stronger revenues at Frontier, be accretive to its free cash flow growth as well as help the company retain its dividend sustainability.
Frontier’s security solutions division, Frontier Secure, has been a solid source of growth. The division witnessed Array4Array% growth in operating income year over year at the end of the fourth quarter of 20Array5 and its subscriptions made a significant contribution to Average Revenue per Customer (ARPC) for the company. At present, the company partners with DistiNow to distribute its security solutions. Frontier can create demand for its wireless and broadband services through these products by offering attractive bundles in the future. This will allow the company to generate revenues going forward.
The Bottom Line
A slew of positives, along with a Zacks Rank #2 (Buy), make Frontier Communications a good buy in the Wireline Communications sector, at present. As the company focuses primarily on rural areas, the company will benefit from expansion of its operations going forward. However, persistent decline in the residential voice segment is a major headwind.
Some other stocks worth considering in the same category are ARRIS International plc ARRS and Aspen Technology, Inc. AZPN. Both the stocks sport a Zacks Rank #Array(Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment