Cincinnati Bell (CBB) Beats Q3 Earnings, Keeps 2016 View

Cincinnati Bell Inc. CBB reported strong financial numbers in third-quarter 2016 wherein both the top and the bottom line beat the Zacks Consensus Estimate.

On a GAAP basis, quarterly net income came in at $18.8 million or 38 cents per share compared with a net income of $79.3 million or $1.85 in the year-ago quarter. Meanwhile, adjusted (excluding special items) earnings per share of 7 cents beat the Zacks Consensus Estimate of 5 cents.

Quarterly total revenue was $312.4 million, up 4% year over year and above the Zacks Consensus Estimate of $301 million.

Operating income was $25.5 million, down 30% year over year owing to higher SG&A (Selling, General and Administrative Expenses) costs along with depreciation and amortization charges. Meanwhile, adjusted EBITDA (earnings before interest, depreciation and amortization) remained flat year over year at $77.5 million in the reported quarter. EBITDA margin was 25% compared with 26% in the year-ago quarter.

Cash Flow

In the third quarter of 2016, Cincinnati Bell generated $43.6 million of cash from operating activities compared with $62 million in the prior-year quarter. Quarterly free cash flow was a negative $21.3 million compared with a negative $0.6 million in the year-ago quarter.

Liquidity

Cincinnati Bell ended the third quarter with cash and cash equivalents of $8.5 million compared with $14.8 million at the end of 2015. Net debt at quarter-end was $1,125.1 million as compared with $1,230.2 million at 2015-end.

Segmental Results

Entertainment and Communications revenues rose up 4% year over year to $193 million owing to a 12% rise in Consumer revenues. The increase was partially neutralized by an 11% decline in Carrier revenues.

IT Services and Hardware revenues increased 5% year over year to $122.9 million. The upside came on the back of a 10% increase in business revenues and 2% rise in integration revenues.

Subscribers Statistics

At the end of the third quarter of 2016, Cincinnati Bell had 0.2049 million residential local access lines, down 7.5% year over year and 0.3189 million business local access lines, up 3.8% year over year. Long distance lines were 0.323 million, down 6%. DSL Internet subscribers were 0.114 million, down 17.2%. Fioptics Internet customer count totaled 0.185 million, up a whopping 29.2%. Fioptics video subscribers were 0.1334 million, up 23% year over year.

Outlook

Cincinnati Bell maintained its guidance for full-year 2016. The company expects revenues and adjusted EBITDA of approximately $1.2 billion and $303 million (plus or minus 2%), respectively.

Zacks Rank & Stocks to Consider

Cincinnati Bell currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Telecom Italia S.p.A. TI, Shenandoah Telecommunications Co. SHEN and Telekom Austria AG TKAGY. All the three stocks carry a Zacks Rank #2 (Buy).

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