Frontier Communications Corporation FTR is scheduled to report second-quarter 2015 financial numbers, before the opening bell on Aug 3.
In the last quarter, the company reported a negative surprise of 60.0%. Notably, the company has missed the Zacks Consensus Estimate in two of the last four quarters, with an average miss of 13.75%. Let’s see how things are shaping up for this announcement.
Factors at Play
We remain optimistic about the company's innovative product launches, improved sales figures and marketing initiatives, significant broadband expansion, and effective cash flow management through a reduction in operating expenses.
However, Frontier Communications is significantly challenged by slow economic recovery in its service territories and struggles to counter the loss of legacy fixed telephony business to wireless and other offerings. Also, the persistent decline in access lines continues to hurt local service revenues, which account for a large share of Frontier Communications’ total revenue. Moreover, despite the need for additional capacity, the company expects the decline in wireless backhaul revenues to continue in 2015.
We believe that a further decline in revenues from these businesses will affect the company’s EBITDA growth to a considerable extent.
Earnings Whispers
Our proven model does not conclusively show that Frontier Communications 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: The Earnings ESP for Frontier Communications is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are poised at 2 cents.
Zacks Rank: Frontier Communication carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Meanwhile, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some other companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.
Ashford Hospitality Trust, Inc. AHT has an earnings ESP of +4.35% and a Zacks Rank #1 (Strong Buy).
Sprint Corp. S has an earnings ESP of +25.0% and a Zacks Rank #3.
The Walt Disney Co. DIS has an earnings ESP of +2.16% and a Zacks Rank #3.
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