Windstream's First Quarter Earnings Preview

May. 6.13 | About: Windstream Holdings, (WIN)

Windstream (NASDAQ:WIN) is scheduled to release its 1st quarter 2013 earnings on Thursday, May 9th. Below I have provided an update of the quarter as well as an overview of earnings expectations.

Profile and Estimates

Windstream has a market cap of $4.96 billion and currently trades for $8.36 per share. Shares are up 4.11% YTD but trade 18.57% below their 52-week high of $10.27. Analysts have a mean target price of $9.63 and a median price target of $9.25 on the shares. Fourteen analysts have an average first quarter earnings per share estimate of $0.11 on estimated revenues of $1.53 billion. Windstream has missed earnings estimates in each of the last four quarters.

(click to enlarge)Click to enlarge

Fundamentals and Highlights (Sources cited below article)

Positives

  • Dividend yield of 11.96%.
  • P/E of 29.9 and P/S of 0.8 are both below the industry averages 43.1 and 1.1 respectively.
  • Operating margin of 14.4% and ROE of 12.9 are both above the industry averages 11.7% and 5.3 respectively.
  • Rural markets that Windstream operates in offer higher margins and less competition.

Negatives

  • Heavily exposed to declining fixed-line business.
  • Operates in highly competitive markets that require expensive network upgrades.
  • P/B of 4.5 and D/E of 7.3 are both above the industry averages 1.9 and 5.3 respectively.
  • Net margin of 2.7% and ROA of 1.2 are both below the industry averages 3.5% and 1.8 respectively.
  • High dividend could face pressure if margins fall and management turns focus towards tackling debt.

Take Away

I see a lot of similarities between Windstream and Frontier Communications (NASDAQ:FTR), two smaller telecommunication businesses profiting under the radar in rural areas. Frontier just cut its dividend and while I think Windstream's yield is safe, I wouldn't be surprised to hear about management tapping the breaks in order to pay down some debt within the next few years. Either way, it's a great dividend pay right now. Keep an eye out for the earnings report on Thursday!

Sources

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

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

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.