Windstream (WIN) Misses Earnings And Revenue Estimates In Q1

Windstream Holdings, Inc. (NASDAQ:WIN) reported tepid first-quarter 2018 financial results, wherein both the top line and the bottom line missed the respective Zacks Consensus Estimate. However, both the figures improved on a year-over-year basis.

Net Loss

For the reported quarter, the company incurred a net loss of $121.4 million or a loss of 65 cents per share compared with a net loss of $111.3 million or a loss of 89 cents per share in the year-ago quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 59 cents.

Revenues

Total revenues increased 6% year over year to $1,454.3 million, supported by growing customer demand for strategic services including Unified Communications as a Service and SD-WAN, and improvement in broadband subscriber trend. The top line, however, missed the Zacks Consensus Estimate of $1,464 million.

Service revenues increased 7% year over year to $1,435.4 million. Consolidated margin improved 150 basis points year over year driven by strong expense management initiatives.

Product sales were down 11% year over year to $18.9 million.

In the reported quarter, total operating expenses were $1,385.3 million, up 5% year over year. Operating income came in at $69 million compared with $44.1 million in the prior-year quarter. Adjusted OIBDAR (operating income before depreciation and amortization and restructuring) came in at $500 million compared with $498.6 million in the year-ago quarter. Adjusted OIBDA was $336.3 million compared with $335.2 million in the year-ago quarter.

Segmental Performance

Consumer & Small Business

Total revenues were $476.5 million, down 6% year over year. Of the total, Service revenues were $471 million and product sales were $5.5 million. Operating income for the segment was $281.9 million, down 2% year over year.

Windstream Enterprise & Wholesale

Enterprise: Total revenues were $746.1 million, up 13% year over year. Of the total, Service revenues were $732.9 million and product sales were $13.2 million. Operating income for the segment was $145.8 million, up 18%.

Wholesale: Total revenues came in at $183.8 million, up 3% year over year. Segment’s operating income was $128.3 million, up 1%.

Consumer CLEC

Revenues totaled $47.9 million compared with $20.7 million in the year-ago quarter. The segment’s operating income was $27.3 million compared with $10.7 million in the prior-year quarter.

Cash Flow

In the first quarter of 2018, Windstream generated $239.3 million of cash from operations compared with $153.7 million in the prior-year period. Adjusted free cash flow was $65.5 million.

Liquidity

As of Mar 31, 2018, Windstream had $60.5 million of cash and cash equivalents and $5,929.3 million of long-term debt.

Outlook

For 2018, the company reiterated its earlier guidance. Windstream anticipates service revenues to improve slightly year over year. The company projects adjusted capital expenditure in the band of $750-$800 million. Adjusted OIBDAR is expected between $1.95 billion and $2.01 billion. Management expects to generate around $165 million of adjusted free cash flow in 2018.

Windstream currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include Mellanox Technologies, Ltd. (NASDAQ:MLNX) , SITO Mobile, Ltd. (NASDAQ:SITO) and Integrated Device Technology, Inc. (NASDAQ:IDTI) . While Mellanox Technologies sports a Zacks Rank #1 (Strong Buy), SITO Mobile and Integrated Device Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mellanox Technologies has an expected long-term earnings growth rate of 15%. It exceeded earnings estimates in each of the trailing four quarters, with an average of 13%.

SITO Mobile has an expected long-term earnings growth rate of 25%.

Integrated Device Technology has an expected long-term earnings growth rate of 10.8%. It exceeded earnings estimates in each of the trailing four quarters, the average being 3.3%.

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