Cincinnati Bell (CBB) Misses Q2 Earnings, Keeps 2016 View

Cincinnati Bell Inc. (NYSE:CBB) reported mixed financial numbers in second-quarter 2016 wherein the top line beat the Zacks Consensus Estimate while the bottom line missed the same.

On a GAAP basis, quarterly net income came in at $75 million or 35 cents per share compared with a net income of $189 million or 85 cents in the year-ago quarter. However, adjusted (excluding special items) earnings per share of 1 cent fell marginally short of the Zacks Consensus Estimate of 2 cents.

Quarterly total revenue was $299.2 million, up 5% year over year and exceeded the Zacks Consensus Estimate of $294 million.

Operating income was $27.4 million, down 8% year over year owing to higher SG&A (Selling, General and Administrative Expenses) costs along with depreciation and amortization charges. Meanwhile, adjusted EBITDA (earnings before interest, depreciation and amortization) decreased 1.7% year over year to $76.3 million in the reported quarter. EBITDA margin was 26%, flat on a year-over-year basis.

Cash Flow

In second-quarter 2016, Cincinnati Bell generated $32.1 million of cash from operating activities compared with $26.4 million in the prior-year quarter. Quarterly free cash flow was $7.6 million compared with a negative $25.5 million in the year-ago quarter.

Liquidity

Cincinnati Bell ended the second quarter with cash and cash equivalents of $9.6 million compared with $14.8 million at the end of 2015. Net debt at quarter-end was $1,130.8 million as compared with $1,230.2 million at 2015-end.

Segmental Results

Entertainment and Communications revenues rose 6% year over year to $192.5 million owing to a 14% rise in Consumer revenues. The increase was partially neutralized by a 6% decline in Carrier revenues.

IT Services and Hardware revenues increased 3% year over year to $109.8 million. The downside came on the back of a 2% decline in integration revenues, partially mitigated by a 10% rise in business strategic revenues.

Subscribers Statistics

At the end of the second-quarter 2016, Cincinnati Bell had 0.2091 million residential local access lines, down 7.4% year over year and 0.3159 million business local access lines, up 2.9% year over year. Long distance lines were 0.3159 million, up 1.9%. DSL Internet subscribers were 0.121 million, down 14.7%. Fioptics Internet customers were 0.175 million, up a whopping 32.1%. Fioptics video subscribers were 0.1268 million, up 24.9% year over year.

Outlook

Cincinnati Bell maintained its guidance for full-year 2016. The company expects revenues and adjusted EBITDA of approximately $1.2 billion and $303 million (plus or minus 2%), respectively.

Zacks Rank & Other Stocks to Consider

Cincinnati Bell currently carries a Zacks Rank #2 (Buy). Some similarly ranked stocks in the sector include Telecom Italia (MI:TLIT) S.p.A. (NYSE:TI) , CenturyLink, Inc. (NYSE:CTL) and Cogent Communications Holdings, Inc. (NASDAQ:CCOI) . All the three stocks sport a Zacks Rank #2.