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Frontier (FTR) Reports Narrower-Than-Expected Loss in Q1

Zacks Equity Research

Frontier Communications Corporation FTR reported lackluster first-quarter 2019 results with year-over-year decrease in revenues and wider loss despite stringent cost management.

Net Loss

For the first quarter, the company incurred net loss of $87 million or loss of 84 cents per share compared with loss of $33 million or loss of 44 cents per share a year ago. The wider loss was due to by lower revenues, severance costs and debt write-off.

Adjusted net loss for the quarter was 18 cents per share, narrower than the Zacks Consensus Estimate of a loss of 45 cents.

Frontier Communications Corporation Price, Consensus and EPS Surprise

 

Frontier Communications Corporation Price, Consensus and EPS Surprise | Frontier Communications Corporation Quote

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Revenues

Quarterly revenues were $2,101 million compared with $2,199 million in the year-ago quarter. The year-over-year decline was primarily due to lower revenues from all the segments. The reported revenues, however, beat the Zacks Consensus Estimate of $2,098 million.

Quarterly Segmental Performance

Revenues from the Customer segment declined to $2,009 million from $2,102 million. While Consumer revenues were $1,077 million (down from $1,128 million) owing to lower voice and video services, Commercial revenues totaled $932 million (down from $974 million) due to lower voice services. Subsidy revenues declined to $92 million from $97 million.

Other Details

Total operating expenses were $1,762 million, down from $1,833 million. Operating income was $339 million compared with $366 million in the prior-year quarter. Adjusted EBITDA totaled $873 million compared with $908 million a year ago, reflecting a margin of 41.6% and 41.3%, respectively.

Cash Flow and Liquidity

For the quarter, Frontier Communications generated $282 million of net cash from operating activities compared with $251 million in the prior-year period. As of Mar 31, 2019, the company had $119 million in cash and equivalents with $16,526 million of long-term debt. At quarter end, Frontier Communications’ leverage ratio was 4.76:1. It remains committed to reducing debt and improving its financial leverage position.

The company completed the sale of wireless towers for $76 million in January 2019, the transaction being neutral to revenues, earnings and adjusted EBITDA for the quarter.

Guidance Affirmed

Frontier Communications reiterated its earlier guidance for 2019. The company continues to expect adjusted EBITDA between $3.45 billion and $3.55 billion. While capital expenditures are expected to be nearly $1.15 billion, cash interest expenses are projected to be around $1.48 billion. Operating free cash flow is projected to be $575-$675 million. The company is poised to benefit from the healthy momentum in a number of initiatives under its transformation program in 2019, 2020 and beyond, while advancing toward its targeted $200 million in EBITDA run rate improvement by 2019 and $500 million by 2020.

Zacks Rank and Stocks to Consider

Frontier Communications currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry are Liberty Global PLC LILA, T-Mobile US Inc. TMUS and Verizon Communications Inc. VZ, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liberty Global is currently trading at P/E (F1) of 36.3x.

T-Mobile has a long-term earnings growth expectation of 15.1%. It delivered average earnings surprise of 12.1% in the trailing four quarters, beating estimates on each occasion.

Verizon has a long-term earnings growth expectation of 4.4%. It delivered average earnings surprise of 3.3% in the trailing four quarters, beating estimates on each occasion.

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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
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