Windstream (WIN) Reports Narrower-than-Expected Q2 Loss

Windstream Holdings Inc. (NASDAQ:WIN) reported mixed financial results in the second quarter of 2016. The company incurred a narrower-than-expected loss in the quarter, while revenues lagged the Zacks Consensus Estimate.

On a GAAP basis, the company generated net income of $1.5 million or 1 cent per share, as against a net loss of $111.2 million or $1.13 per share in the year-ago quarter. On an adjusted basis, the company reported loss per share of 29 cents, considerably narrower than the Zacks Consensus Estimate of a loss of 43 cents.

Total revenue declined 4.3% year over year to $1,359.6 million in the second quarter, missing the Zacks Consensus Estimate of $1,375.4 million. Service revenues declined 3.3% to $1,331.3 million while Product revenues plunged 35.5% to $28.3 million.

In the reported quarter, total operating expenses were $1,205 million, up 10.2% year over year. Operating income was $1546 million, up a whopping 95% year over year. Adjusted OIBDA (operating income before depreciation and amortization) was $318.8 million, up 0.6% year over year.

Cash Flow

In the second quarter of 2016, Windstream generated $297.3 million of cash from operations compared with $136.2 million in the prior-year quarter. In the reported quarter, adjusted free cash flow was a negative $13.4 million compared with a negative $91.4 million in the year-ago quarter.

Liquidity

Windstream exited the second quarter of 2016 with $41.6 million of cash and cash equivalents and $4,743.5 million of total debt.

Subscriber Statistics

In the reported quarter, Windstream lost 4% of its high-speed Internet customers and 8% of its digital television subscribers. At the end of the second quarter, the company had 1,403,800 Household customers. High-speed Internet customer base was 1,075,800 and digital TV customer base was 342,000.

Segment-Wise Information

Consumer & Small Business - ILEC: Total revenue was $395.2 million, down 2% year over year. Of the total, Consumer revenues were $311 million, down 1%. Small Business – ILEC revenues were $84.2 million, down 5%. Total profit for the segment was $225.4 million, down 15.4%.

Small Business – CLEC: Revenues totaled $125.3 million, down 12% year over year. Segment profit was $41.2 million, down 8%.

Carrier: Revenues came in at $159.9 million, down 7% year over year. Segment profit was $114.7 million, down 7%.

Enterprise: Total revenue was $509.3 million, flat year over year. Of the total, Service revenues were $491.3 million, up 3%. Product sales were $18 million, down a substantial 43%. Total profit for the segment was $79.8 million, up a whopping 68%.

Outlook

For 2016, the company expects total service revenues in the range of $5275–$5425 million. It projects capital expenditure in the band of $800–$850 million. Meanwhile, adjusted OIBDAR is anticipated to be around $1.90–$1.95 million.

Zacks Rank & Stocks to Consider

Windstream currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Telecom Italia (MI:TLIT) S.p.A. (NYSE:TI) , SK Telecom Co. Ltd. (NYSE:SKM) and Cincinnati Bell Inc. (NYSE:CBB) . All three stocks carry a Zacks Rank #2 (Buy).