Altice (ATUS) Beats Q3 Earnings Estimates On Record Margins

Altice USA, Inc. (NYSE:ATUS) reported all-time best results in third-quarter 2018 with healthy year-over-year increase in earnings and revenues, driven by improved subscriber trends, highest ever margin and higher free cash flow.

Quarterly net income was $32.6 million or 4 cents per share against a net loss of $192.6 million or loss of 26 cents per share in the year-ago quarter. The radical improvement was mostly driven by higher revenues and lower depreciation and amortization charges. The reported earnings comfortably beat the Zacks Consensus Estimate of loss of 4 cents.

Quarter Details

Total revenues increased 4.1% year over year to $2,417.8 million driven by growth across all business segments and beat the Zacks Consensus Estimate of $2,401 million.

Residential revenues were $1,945.9 million, up 2.4% year over year with improving customer trends and net additions in broadband business. Average revenue per user increased 2.3% year over year to $143. Business services revenues were $344.2 million, up 6% with both the Enterprise and SMB units continuing to trend well, due to improved value proposition with voice and data bundles and reduced churn.

Advertising revenues totaled $123.1 million, up 37.8% owing to higher targeted data and analytics revenues. During the quarter, its cross-section advertising firm a4 launched Athena, a new self-serve client application for end-to-end multi-screen campaign management with “one-stop shopping” for advertisers. With in-depth reporting, measurement and analytics services, Athena has become the primary growth driver of a4.

Quarterly operating income improved significantly to $505.6 million from $120.6 million in the year-ago quarter mainly due to decline in depreciation and amortization. Adjusted EBITDA was $1,070.5 million compared with $1,012.3 million in the prior year.

Cash Flow & Balance Sheet

Operating free cash flow for the quarter was down 2.8% to $736 million, reflecting increased investment in new fiber-to-the-home. Free cash flow increased 28.0% year over year in the quarter to $276 million, bringing the year-to-date figure to $937 million, up 66.4%. At the end of third-quarter 2018, the company’s net debt was $21,562 million.

Guidance Reiterated

For full-year 2018, Altice continues to anticipate revenue growth of 2.5-3% year over year. The company also reiterated the plan to expand its adjusted EBITDA and cash flow margins, over the medium to long term.

Zacks Rank & Stocks to Consider

Altice currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include Arista Networks, Inc. (NYSE:ANET) , Corning Incorporated (NYSE:GLW) and Knowles Corporation (NYSE:KN) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arista has a long-term earnings growth expectation of 21.2%. It beat earnings estimates in each the trailing four quarters, the average being 13.4%.

Corning has a long-term earnings growth expectation of 8.8%. It beat earnings estimates in each the trailing four quarters, the average being 4.1%.

Knowles has a long-term earnings growth expectation of 10%. It surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 11%.

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