Windstream Lags on Q1 Earnings - Analyst Blog

Windstream Holdings Inc. (NASDAQ: WIN) reported first-quarter 2014 adjusted earnings per share of 4 cents, below the Zacks Consensus Estimate of 9 cents and lower than 10 cents earned in the year-ago quarter.

Pro forma revenues decreased 2.1% year over year to $1,464.9 million in the first quarter and also fell short of the Zacks Consensus Estimate of $1,473.0 million. The disappointing results have pushed the stock down by 5.38% in the pre-market trade on Nasdaq.

Total Service revenues fell 2.2%, while Product revenues were flat year over year in the first quarter.

Adjusted OIBDA (excluding non-cash pension expense, non-cash stock-based compensation and restructuring charges) was $540.4 million, down 7.8%.

Subscriber Statistics

During the first quarter, total access lines, which include voice lines, high-speed Internet and digital television customers, decreased 4.9% year over year to 3.27 million. On a year-over-year basis, voice lines dropped 6.0% while digital television customers witnessed a decline of 5.3%. High-speed Internet also fell 2.9%.

Liquidity

Windstream exited first quarter with cash and cash equivalents of $70.0 million compared with $48.2 million in 2013. Long-term debt and capital lease obligations were $8,617.6 million compared with $8,622.2 million at the end of 2013.

The company generated adjusted free cash flow of $314.0 million while adjusted capital expenditure was $153.0 million in the first quarter.

Dividend

The company paid dividend worth $150.2 million during the quarter.

Outlook

For 2014, the company expects total revenue to range between a 2.5% fall and a 1% rise over the 2013 number. Windstream anticipates capital expenditures in the range of $800–$850 million, and adjusted free cash flow of $775–$885 million, which would result in a dividend payout ratio ranging from 68% to 78%.

Our Analysis and Zacks Rank

Windstream has a Zacks Rank #3 (Hold). We believe the company is poised for long-term growth based on its investments in fiber-to-the-tower and broadband networks along with proper cost management. However, a competitive market scenario, continuous access line loss, regulatory issues and a high debt burden will impede its growth.

Other Stocks

United States Cellular Corp. (NYSE: USM), a subsidiary of Telephone and Data Systems Inc. (NYSE: TDS), reported first-quarter 2014 loss per share of 51 cents, much wider than the Zacks Consensus Estimate of a loss of 41 cents.

On the other hand, Frontier Communications Corp. (NASDAQ: FTR) reported its first-quarter 2014 adjusted earnings per share of 5 cents, missing the Zacks Consensus Estimate by a penny.


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