Frontier Communications Corporation
), a provider of telecommunication services to rural areas,
reported its first-quarter 2014 adjusted earnings per share of 5
cents, missing the Zacks Consensus Estimate by a penny. The
bottom line, however, remained flat on a year-over-year basis. A
decline in revenues primarily impacted earnings in the
Quarterly revenue of $1,154.0 million missed the Zacks
Consensus Estimate of $1,165.0 million and dropped 4.3% from the
year-ago quarter. Lower voice revenues, less of non-switched
access revenues along with expenses on dispute settlement and
unfavorable timing on CPE sales impacted the quarterly
performance, partially offset by increased data service and
On a year-over-year basis, voice revenues fell 8.3% to $482.3
million while data and Internet services revenues increased 1.5%
to $461.5 million. Other revenues registered a decline of 6.4% to
Adjusted operating income in the first quarter declined 9.9%
year over year to $226 million. Adjusted operating margin was
20.8% compared with 21.4% in the year-ago period.
At the end of first-quarter 2014, the number of residential
customers was 2,793,900, while business subscribers totaled
266,400. Customer churn was 1.63% versus 1.64% in the first
quarter of 2013.
Frontier added approximately 37,200 broadband users in the
first quarter to reach 1,903,800 (up 6.8% year over year). As of
Mar 31, 2014, video subscribers reached 390,300 (up 7.0% year
Frontier exited the first quarter with $954.2 million of cash
and cash equivalents compared with $880.0 million at year-end
2013. Long-term debt decreased to $7,762.7 million at the end of
the quarter from $7,873.7 billion at the end of 2013.
In the first quarter, the company incurred capital expenditure
of $135.1 million for business operations, as against $189.0
million in the year-ago quarter. Free cash flow was $235.2
million against $206.2 million in the year-ago quarter.
The company paid a total of $100.2 million in dividends in the
quarter, equal to a dividend payout of 43% of free cash flow
compared with dividend payments of $99.8 million in the first
quarter of 2013, which was equal to a dividend payout of 48%.
For 2014, Frontier reaffirmed its financial guidance.
The company expects capital expenditures and free cash flow in
the bands of $575-$625 million and $725-$775 million,
respectively. The company also expects cash tax expense in the
range of $130-$160 million.
The company expects an additional operating expense of
$140-$170 million and capital expenditure of $85-$105 million in
relation to its acquisition and integration activities of
) Connecticut business.
AT&T Connecticut Transaction
Frontier expects to close the acquisition of AT&T's
business in Connecticut in the fourth quarter of 2014 and
believes that it will improve its free cash flow and dividend
We appreciate the various strategic initiatives taken by
Frontier, which include market share gains, new product
deployment, broadband expansion, new pricing plans and lucrative
collaborations. We also remain encouraged by the strong
performance of its broadband division and expect the momentum to
continue in 2014 based on the company's various initiatives.
However, we prefer to remain on the sidelines at present on
account of strong competition in the telecommunication market,
regulatory issues and the effects of high promotional costs as
well as access line loss, which continue to pose major threats to
Frontier carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the telecom sector include
Level 3 Communications, Inc.
Nippon Telegraph and Telephone Corp.
). While, Level 3 Communications has a Zacks Rank #1 (Stong Buy),
Nippon Telegraph holds a Zacks Rank #2 (Buy).
FRONTIER COMMUN (FTR): Free Stock Analysis
LEVEL 3 COMM (LVLT): Free Stock Analysis
NIPPON TELE-ADR (NTT): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
To read this article on Zacks.com click here.