Windstream Corporation
(
WIN
) has reported third quarter 2012 adjusted earnings per share of
12 cents, missing the Zacks Consensus Estimate by a penny.
Adjusted earnings for the quarter were down 20% from the year-ago
earnings of 15 cents.
Adjusted earnings excluded negative impacts of $7.8 million in
after-tax merger and integration expense and $7.5 million in
restructuring costs.
Including these costs, the company reported GAAP earnings per
share of 9 cents, down 40% year over year.
Pro forma revenue decreased 1.2% year over year to $1,552.4
million in the third quarter but remained ahead of our
expectation of $1,541 million.
Adjusted OIBDA (excluding non-cash pension expense, non-cash
stock-based compensation and restructuring charges) was down to
$603.1 million in the third quarter from $610.3 million in the
year ago quarter.
Subscriber Statistics
During the third quarter, total access lines, which include
voice lines, high-speed Internet and digital television customers
dropped 2% year over year to 3.52 million. Windstream lost 71,900
access lines year over year. Voice lines declined 4% year over
year to $1.87 million.
Windstream added as many as 6,000 new high-speed Internet
customers, bringing its total customer base to 1.36 million (up
1.9% year over year). Video customers decreased to 442,700 from
444,800.
Liquidity
Windstream exited the third quarter with cash and cash
equivalents of $114.8 million, compared to $34.3 million in the
prior-year quarter. Long-term debt and capital lease obligations
were $7,848.3 million compared to $8,936.7 million at the
year-end 2011.
The company generated adjusted free cash flow of $182.4
million. Capital expenditure was $307.3 million in the third
quarter compared to $222.7 million in the year-ago quarter.
Our Analysis
We believe Windstream remains poised to gain from high-speed
Internet services that are benefiting from increased market
traction. Additionally, the company's latest acquisition of
PAETEC, a leading broadband service provider will also be aided
by expanding service offerings, increasing wireless data backhaul
services and offering managed services and cloud computing.
Further, Windstream's deleveraging initiatives and refinancing
activities are expected to generate healthy cash flows,
subsequently attracting investors through a high dividend
payout.
However, we remain on the sidelines due to competitive
pressure from peers like
Frontier Communications
(
FTR
), a highly leveraged balance sheet as well as continued
access-line erosion, which could partially be offset by a high
dividend yield and broadband opportunities.
We are currently maintaining our long-term Neutral
recommendation on Windstream supported by a Zacks #3 Rank
(Hold).
FRONTIER COMMUN (FTR): Free Stock Analysis
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WINDSTREAM CORP (WIN): Free Stock Analysis
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