What's In Store For Cincinnati Bell (CBB) In Q3 Earnings?

Telecom service provider Cincinnati Bell Inc (NYSE:CBB) is slated to report third-quarter 2017 results on Nov 2, before the opening bell.

In the last quarter, the company reported a negative earnings surprise of 12.50%. Moreover, the company’s earnings lagged the Zacks Consensus Estimate in two of the previous four quarters, with an average miss of 1.04%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Cincinnati Bell continues to experience erosion in high-margin local access lines. Expansion and maintenance of its networks require significant capital expenditures. Intense competition in the company’s operational region can be a drag on the company’s pricing power, thereby inducing downward pressure on its margins.

Moreover, in second-quarter 2017, the company’s performance in certain metrics was quite disappointing. We expect the company to recover from these factors in the to-be-reported quarter.

However, we appreciate Cincinnati Bell’s efforts to transform itself from a telecom company into a technology company with fiber assets offering flexible data, video, voice and IP solutions to consumers and business clients. Offering of eero’s WiFi products should expand its FTTH customer base. We appreciate the company’s decision to expand its call centre base by hiring more workers. Buyout of OnX Enterprise Solutions will expand Cincinnati Bell’s network and enterprise IT services.

In the Entertainment and Communications business, the company’s investment in Fioptics products led to revenue growth and subscriber addition in second-quarter 2017. We expect to see a similar uptrend in the Fioptics Internet and video segment in the to-be-reported quarter.

In the past three months, the company’s shares have returned 4.3% as against the industry’s decline of 6.6%.

Estimated Subscriber Statistics

At the end of the third quarter of 2017, the Zacks Consensus Estimate for Cincinnati Bell’s residential voice lines is 0.188 million as against 0.192 million in the second quarter of 2017. Long-distance lines are expected at 0.269 million compared with 0.304 million reported in the previous quarter.

DSL internet subscribers is pegged at 0.086 million compared with 0.093 million as reported by the company in second-quarter 2017.

Fioptics internet customers is pegged at 0.222 million compared with 0.214 million as reported in the previous quarter. Fioptics video subscribers is estimated at 0.147 million, up from 0.143 million reported in the year-ago quarter. The company’s Fioptics related businesses show a positive trend.

Earnings Whispers

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

Zacks ESP: Cincinnati Bell has an Earnings ESP of +128.57%. This is because the Most Accurate estimate stands at 1 cent while the Zacks Consensus Estimate is pegged at a loss of 2 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cincinnati Bell has a Zacks Rank #4 (Sell).

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

Stocks to Consider

Here are some companies from the broader Utilities sector, which houses Cincinnati Bell, and have the right combination of elements to post an earnings beat this quarter.

Frontier Communications Corporation (NASDAQ:FTR) has an Earnings ESP of +4.09% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company will report third-quarter 2017 results on Oct 31, after the closing bell. The company’s earnings surpassed the Zacks Consensus Estimate in one of the previous four quarters.

TELUS Corporation (NYSE:TU) has an Earnings ESP of +4.91% and carries a Zacks Rank #3. The company will release third-quarter 2017 financial results on Nov 9. The company’s earnings surpassed the Zacks Consensus Estimate in one of the previous four quarters.

Shenandoah Telecommunications Co (NASDAQ:SHEN) has an Earnings ESP of +300.00% and carries a Zacks Rank #3. It will release third-quarter financial results on Nov 2. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters.

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