Frontier Communications Inc. (FTR) is slated to report its second-quarter 2014 financial results on Aug 5, after the market closes. In the last reported quarter, the company had delivered a 16.7% negative earnings surprise. Let’s see how things are shaping up prior to this announcement.
Factors Influencing Results this Quarter
We believe product deployment, broadband expansion and cash flow management through reduced operating expenses will be accretive to the company’s growth. Additionally, changes in the channel distribution structure and Frontier’s deeper focus on infrastructural development, enhancement of network speed and shareholder returns bode well for long-term growth.
However, stiff competition, backhaul revenue pressure, integration cost as well as higher financial leverage would continue to weigh on Frontier Communications’ earnings. Reduction in residential customers and decline in voice business also remain as concerns for the company.
Earnings Whispers?
Our proven model does not conclusively show that Frontier Communications is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP:Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -20.00% for Frontier Communications.
Zacks Rank: Frontier Communications carries a Zacks Rank #4 (Sell) which further decreases the predictive power of ESP.
Moreover, we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.
Other Stocks to Consider
Here are some companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Windstream Holdings Inc. (WIN) with earnings ESP of +12.50% and a Zacks Rank #2.
Dish Network Corp. (DISH) with earnings ESP of +15.39% and a Zacks Rank #3.
Telus Corp. (TU) with earnings ESP of +1.85% and a Zacks Rank #3.
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