Updated Research Report on Windstream - Analyst Blog

On Mar 11, 2014, we issued an updated research report on one of the largest rural local exchange carriers Windstream Holdings Inc. WIN. The company is expected to benefit from its investments in fiber-to-the tower and broadband networks along with proper cost management. The Little Rock, AR-based company currently carries a Zacks Rank #3 (Hold).

We believe fiber-to-the tower represents a long-term opportunity for the company and with the rise in demand and contract wins, Windstream is ramping up its FTTT construction. Windstream completed the construction of approximately 4,500 towers and expects to finish the year with 5,200 towers.

With respect to broadband expansion, Windstream focuses on enhancing coverage and services in the rural market. The company currently offers broadband speeds of 10 Meg to 12 Meg in 52% addressable lines and 24 Meg service to 17% of its addressable lines. These initiatives are expected to drive revenues for the company.

Windstream has adopted a number of measures to broaden its business horizon. The company has been adding a number of data centers, employing efficient sales people to boost the sales figure and render greater customer satisfaction, and investing in business channel. Windstream opened three data centers in 2013 and recently opened another one in Charlotte, NC.

Windstream's major risks also include access lines losses, lower switched access rates and fewer minutes of use that are affecting its revenues from the wireline business unit. A highly leveraged balance sheet is another concern for the company.

Based on low demand and a subdued sales environment within the enterprise business, the company remains skeptical about revenue growth in 2014. It expects total revenue in 2014 to range from down 2.5% to up 1% from 2013.

Key Pick from the Sector

While remain sidelined on Windstream, Zacks Ranked #2 (Buy) Inteliquent Inc. IQNT, Meru Networks Inc. MERU and Level 3 Communications Inc. LVLT look attractive for the short term.