Windstream (WIN) Likely to Outshine Q4 Earnings Estimates - Analyst Blog

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Windstream Holdings, Inc. ( WIN ) - one of the largest rural local exchange carriers (RLEC) in the U.S. - is slated to release its fourth-quarter 2014 results on Feb 24, 2015, before the opening bell.

Last quarter, Windstream had delivered a 25.00% negative earnings surprise. Moreover, the company's earnings have lagged the Zacks Consensus Estimate in three of the last four quarters, leading to an average miss of 35.77%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Windstream is likely to beat earnings because it has the perfect combination of two key ingredients.

Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +33.33%. This is because the Most Accurate estimate stands at 4 cents, whereas the Zacks Consensus Estimate is pegged lower at 3 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank : Windstream currently has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Windstream's Zacks Rank #3 and +33.33% ESP makes us reasonably confident of a positive earnings beat at the company.

What is Driving the Better-than-Expected Earnings?

The company's relentless focus on improving sales, cost-cutting initiatives and planned pricing initiatives, should drive revenues and margins in the fourth quarter. Further, enhancement of its long haul network and investments made in data center and fiber expansion also bode well for the company.

In Nov 2014, Windstream streamlined costs through job retrenchment activities, cutting 350 job positions across several of its departments, in order to bolster its bottom line. In December, the company was rewarded with a five-year multimillion-dollar contract by the National Weather Service (NWS). We believe the contract win will drive the company's top line higher.

However, threats from a competitive market, soft carrier transport business situation, and a highly leveraged balance sheet may weigh upon the quarter's performance.

Other Stocks to Consider

Windstream is not the only company looking up this earnings season. Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Townsquare Media, Inc. ( TSQ ) has an earnings ESP of +9.52% and a Zacks Rank #3.

AMC Networks Inc. ( AMCX ) has an earnings ESP of +6.86% and a Zacks Rank #3.

American Tower Corporation ( AMT ) has an earnings ESP of +2.00% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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