Frontier Communications (FTR): Earnings Preview For Q3

Frontier Communications Corporation (NASDAQ:FTR) , a leading regional telecommunication company in the U.S., is scheduled to report third-quarter 2016 results on Nov 1, after market close.

Last quarter, the company posted an impressive 60.00% positive earnings surprise. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 209.45%. Let’s see how things are shaping up for this announcement.

Factors at Play

We are impressed with Frontier Communications’ focus to rake in more profits through customer retention, market share gain, new product introductions, broadband expansion and improved sales and marketing initiatives. The company is striving to derive benefits from the growing Business Service Segment,especially the SMB segment. As part of its marketing plans, the company launched its first retail outlet in Southern California. Purchase of Verizon’s wireline assets in California, Florida and Texas although bodes well as it has expanded Frontier Communications’ landline business, broadband, video, voice and FiOS services in the states. Meanwhile, reports on outages, poor telephone service and billing problems raise concern.

Further, Frontier Communications is grappling with slow economic recovery in its service territories and loss of legacy fixed telephony business to wireless and other offerings. This is mainly due to customer migration to Ethernet solutions at lower price points.The company expects to continue experiencing decline in wireless backhaul revenues due to customer migration to Ethernet solutions at lower price points.

Earnings Whispers

Our proven model does not conclusively show that Frontier Communications is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Frontier Communications has an earnings ESP of -66.67%. This is because the Most Accurate estimate is pegged at a loss of 5 cents and the Zacks Consensus Estimate is pegged at a loss of 3 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Frontier Communications has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies that have the right combination of elements to post an earnings beat this quarter.

Western Digital Corporation (NASDAQ:WDC) , with an earnings ESP of +0.95% and a Zacks Rank #2.The company’s earnings beat the Zacks Consensus Estimate in two of the previous four quarters.

Apple Inc. (NASDAQ:AAPL) , with an earnings ESP of +1.21% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here. The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters.

Open Text Corporation (NASDAQ:OTEX) , with an earnings ESP of +6.12% and a Zacks Rank #2.The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>