Windstream Q2 Loss Narrower than Expected, Revenues Beat

Windstream Holdings Inc. WIN reported encouraging financial results in the second quarter of 2015. The company's second-quarter loss was narrower than expected while revenues beat the Zacks Consensus Estimate.

GAAP net loss stood at $111.2 million or a loss of $1.13 per share compared with net income of $14 million or 13 cents in the year-ago quarter. The company reported adjusted loss per share of 48 cents, considerably narrower than the Zacks Consensus Estimate of a loss of 61 cents.

Pro forma revenues decreased 3% year over year to $1,421.1 million in the second quarter but was above the Zacks Consensus Estimate of $1,417 million. Total Service revenues fell 3% to $1,377.2 million while Product revenues declined 9% year over year to $43.9 million.

Product category wise, Enterprise and small business service revenues totaled $736 million. Overall consumer service revenues were $313.8 million, down 0.8 year over year. Carrier service revenues were $172.3 million, reflecting a decline of 5.5% from the year-ago quarter. Regulatory and other revenues grossed $149.8 million, down 5.1% from the prior-year quarter.

Adjusted OIBDA (excluding non-cash pension expense, non-cash stock-based compensation and restructuring charges) was $326.9 million, down 13%. The company also announced a share repurchase program worth $75 million which is expected to be complete by Dec 31, 2016.

Liquidity & Cash Flow

In the second quarter of 2015, Windstream generated $136.2 million of cash from operations compared with $361.8 million in the prior-year quarter. Free cash flow in the reported quarter stood at a negative $118.8 million against free cash flow of $156 million in the year-ago quarter.

Windstream exited the second quarter of 2015 with $47 million of cash and cash equivalents compared with $54.8 million at the end of Jun 30, 2014. Long-term debts at the end of the second quarter totaled $5,637.9 million compared with $7,846.5 million at 2014-end.

Subscriber Statistics

In the reported quarter, Windstream lost 2.9% of its high-speed Internet customers and 5.5% digital television subscribers. At the end of the second quarter, the company had 1,573,800 voice lines customers.

Outlook

For fiscal 2015, the company expects total service revenues to be down 3% to flat year over year. Windstream also projects capital expenditures in the band of $825–$875 million. Meanwhile, the company expects adjusted OIBDA margins, as a percentage of total revenue, in the range of 34% to 34.5% for the year.

Stocks to Consider

Windstream currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include T-Mobile US, Inc. TMUS, Inteliquent, Inc. IQNT and Ruckus Wireless, Inc. RKUS. All these stocks hold a Zacks Rank #2 (Buy).

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