A month has gone by since the last earnings report for Zayo Group (ZAYO). Shares have lost about 1.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zayo Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Zayo Q4 Earnings Beat Estimates, Revenues Up Y/Y
Zayo reported better-than-expected fourth-quarter fiscal 2018 results, wherein both the top line and bottom line beat the respective Zacks Consensus Estimate.
The company's earnings came in at 18 cents per share, which surpassed the Zacks Consensus Estimate of 9 cents. Notably, the bottom line surged 38.5% from the year-ago tally of 13 cents. Earnings increased on the back of top-line growth.
Revenues came in at $657.6 million, up 3.1% year over year. Also, the reported figure beat the Zacks Consensus Estimate of $657.5 million. Improvement in the metric was driven by solid growth across most of its segments.
Operating income was $120.2 million compared with $105.4 million in the year-ago quarter. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased $14.1 million year over year to $324.9 million.
For fiscal 2018, the company's operating income came in at $424.9 million, higher than the reported figure of $373.8 million in fiscal 2017.
Revenues from the Fiber Solutions segment totaled $225.6 million, increasing 16.2% year over year. It represented 34.3% of the company's fiscal fourth-quarter revenues.
The Transport segment generated revenues of $169.9 million, up 2% year over year. It represented 25.8% of revenues for the reported quarter.
The Enterprise Networks segment's revenues were $85.0 million, up 1% year over year and accounted for 12.9% of the company's quarterly revenues.
Revenues at the Zayo Colocation segment were up 6.3% year over year to $60.3 million. It represented 9.2% of fiscal fourth-quarter revenues.
The Allstream segment generated revenues of $111 million, down 13.8% year over year. It represented 16.9% of revenues for the reported quarter.
The Other segment's revenues were $5.8 million, accounting for 0.9% of the company's fiscal fourth-quarter revenues.
Liquidity & Costs
As of Jun 30, 2018, Zayo's cash and cash equivalents were $256.7 million compared with $220.7 million as of Jun 30, 2017. Net cash provided by operating activities was $251.8 million for the reported quarter compared with $244.9 million a year ago.
For fiscal 2018, the company's total operating costs and expenses came in at $2,179.1 million, reflecting an increase of 19.3% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 31.52% due to these changes.
Currently, Zayo Group has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Zayo Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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