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Frontier Communications (NASDAQ:FTR) is scheduled to release its 1st quarter 2013 earnings on Monday, May 6th at 4:30 pm ET. Below I have provided an update of the quarter as well as an overview of earnings expectations.

Profile and Estimates

Frontier Communications has a market cap of $4.11 billion and currently trades for $4.02 per share. Shares are down 1.44% YTD but trade 44.69% above their 52-week low of $2.78. Analysts have a mean target price of $4.64 and a median price target of $4.50 on the shares. Fifteen analysts have an average first quarter earnings per share estimate of $0.06 on estimated revenues of $1.22 billion. Frontier Communications has missed earnings expectations twice in the last four quarters.

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Fundamentals and Highlights (Sources cited below article)

Positives

  • P/E of 31.6, P/B of 1.0 and P/S of 0.8 are all below the industry averages 42.7, 1.9, and 1.1 respectively.
  • Operating margin of 19.7% is above the industry averages 11.7%.
  • Dividend yield of 9.71%.

Negatives

  • Net margins of 2.7%, ROA of 0.8 and ROE of 3.2 are all below the industry averages 3.5%, 1.8, and 5.3 respectively.
  • D/E of 2.0 is above the industry averages 0.8.
  • Negative ROIC, per Morningstar.com, in each of the last ten years.
  • Total customers serviced declined 7% last year. Company lost both business and residential customers.
  • More capital will ultimately be needed to finance large network upgrades.
  • Turning around assets purchased from Verizon may end up being harder than expected.

Mixed

  • Dividend cut will free up more money for FTR to use to pay down debt which will in turn help lower interest payments. Interest expense in the prior quarter stood at $179 million. Dividend payments in 2011 totaled $746 million compared to $399 million in 2012.

Take Away

Frontier definitely has its work cut out for itself. This quarter will hopefully see some relief as far as margins go but ultimately, the name of the game in the near future has to be tackling that debt load. This will be increasingly difficult when at the same time the company is trying to upgrade its network. This company has a long way to go, I personally feel the price is fair considering the market outlook, the risk involved and the dividend yield but as we saw from the prior cut, nothing is a guaranteed.

Sources

In addition to the links above, ratios and financial data was sourced from Morningstar.com, which you can find here and here.

Other company data was sourced from the annual report that can be found here.

Source: Frontier Communications First Quarter Earnings Preview