FBR Is Positive On Shenandoah Telecom, But Downgrades Shares On Valuation Concerns

FBR Capital downgraded Shenandoah Telecommunications Company SHEN to Market Perform from Outperform, but lifted its price target to $35 from $31, based on their revised sum-of-the-parts valuation.

The company reported 2Q16 revenues of $130.3 million (52.1 percent increase year-over-year), beating the consensus estimate of $103.0 million, mainly caused by the inclusion of NTELOS Holdings Corp NTLS results. Adjusted EBITDA dropped to $26.9M driven by higher SG&A associated with a higher number of PCS stores and the integration and migration of NTELOS customers to Shenandoah.

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"The 2Q results included approximately eight weeks of NTLS (following the deal's close on May 6, 2016) but, importantly, did not include all revenues from Sprint customers and wholesale customers in the NTLS region after closing, due to billing-cycle differences," wrote FBR.

The analysts also adjusted their FY16 revenue/adjusted EBITDA/EPS estimates to $342.5 million/$170.3 million/$0.56 following the quarterly results. Their FY17 revenue/adjusted EBITDA/EPS estimates currently stands at $640.0 million/$243.3 million/$1.35.

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