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There are 2 articles on this stock available only to PRO subscribers.
- Windstream reports its Q3 2014 results.
- Revenues decline 2%, led by lower voice and carrier revenues.
- Windstream also provides an update to its 2014 guidance.
- The REIT spin-off is expected to occur by Q1 2015.
- As a result, Windstream will be lowering its dividend by a substantial amount.
Windstream's Dividends Face Risk As Company Moves To Stabilize Top-Line Decline
- Network enhancement and expansion efforts will support currently struggling broadband subscriber base.
- Highly levered balance sheet and network investment pressure pose risk to dividends.
- Company needs to direct cash flows towards network investment.
- Windstream Corp. reported earnings before the bell on November 6.
- The company missed EPS estimates and also guided for full year revenue on the lower end of projections.
- The company's subscription base is dwindling at an alarming rate and while free cash flow increased Q/Q it's still decreasing Y/Y.
- With little to no growth in earnings and revenue combined with a looming dividend cut, the time to sell Windstream Corp is now.
- Windstream reports its earnings on November 6th, 2014.
- Coming off a disappointing second quarter and with the REIT split looming closer, the company needs to impress.
- Three things to watch closely are subscriber numbers, free cash flow and full-year guidance.
- Windstream Corp. is a network communications provider that is in a transition period.
- The company has seen steep revenue and EPS declines and has continuously missed analyst estimates.
- Struggling with growth and free cash flow, the company is looking to a REIT spin-off for help.
- Along with the REIT spin-off, the company will essentially cut its dividend by 30%.
- With the REIT spin-off and dividend cut looming, I would sell Windstream Corp. before 2015.
- The adoption of a REIT framework will give Windstream substantial financial flexibility.
- Windstream's balance sheet was stretched, which made it difficult for the company to raise funds and pursue growth projects.
- The overall exposure to debt will remain unchanged for a shareholder who holds both entities.
- The REIT will be an income stock, while Windstream will become a growth stock, in my opinion, which will give investors an option to tweak their portfolios.
Windstream Holdings: Moving Ahead Despite Challenges
- Top line and subscriber growth likely to remain under pressure in near term due to competitive industry conditions.
- Company taking right steps to support top-line numbers through network expansion and enhancement efforts.
- Growth potential of cloud services will positively affect performance.
Windstream's Upcoming REIT Spin-Off - Facts And Takeaways
- Windstream has received permission from the IRS via a private letter ruling to spin off certain assets into a new REIT, tax-free.
- This upcoming spin-off of the REIT offers certain advantages to support the growth of the company.
- With a separate company, it opens the door for the two companies to explore additional opportunities.
Why Windstream's Impressive Performance Can Come To A Halt
- Windstream's is witnessing a decline in important sectors.
- The company is running out of cash and its financial outlook is poor.
- The company's earnings are expected to decline in the coming years and it may not be able to sustain its dividend payout.
- Windstream is a sell.
Windstream Presents Mixed Picture With Weak Performance But Promise Of Boost To Future Revenues
- Investments in expanding broadband network will add to subscriber base and revenues in the future.
- Weak operational performance, struggling top line, pressurized broadband subscriber base and weak cash flows likely to keep stock price pressurized in near term.
- Company needs to re-size dividends.
Windstream Retains Neutral Thesis As Performance Stays Poor In Second Quarter
- Revenues for consumer and business segments declined, contributing 84% to total revenues.
- Loss of subscribers in all major segments was worrying sign for investors.
- REIT structure proposed by management will reduce taxes, and savings could be diverted to network enhancement.
- Windstream to spin off its physical assets into a publicly traded REIT.
- As a result, the stock staged a major rally, up 25% before settling at a 12% increase.
- According to the news release, the dividend for the combined companies is $0.70 per share, 30% lower from the current $1.00 per share.
- At current prices, Windstream would yield 6%.
- Windstream shares rallied on Tuesday after announcing a REIT, but this was a mistake.
- Windstream will put its network assets to a REIT, lever it up, spin it out to shareholders, and sign a long term lease to operate the network.
- In reality, this deal increases effective leverage while cutting the dividend. Investors should sell WIN.
- Windstream announced plans to spin off fiber/copper network into a REIT.
- Even confirmed original thesis that investors should focus on FCF and assets.
- The ability to spin off assets into a REIT was not anticipated though it was suggested that the company should focus on a more flexible capital allocation strategy.
- Windstream's balance sheet is in a weak position, while the company's earnings are expected to decline, and this might force it to cut the dividend.
- Windstream's business is not in the best of health either as revenue and earnings declined last quarter.
- Windstream needs to invest in the business to arrest its revenue and earnings decline, and this will strain its resources.
Windstream Holdings: Uncertain Revenue Base Stability Means Investors Should Wait
- Company’s efforts to stabilize revenue base are still in progress.
- Competitive pressure from peers has taken toll on WIN’s broadband subscriber base.
- Aggressive investments to stabilize revenues and grow subscriber base will keep cash flows under pressure.
Windstream Needs To Revise Dividend Strategy As Company Remains Overvalued
- WIN’s broadband internet shows signs of recovery despite numbers being negative.
- Business revenue has lost momentum.
- Investors continue to enjoy high yield, but risks of elevated payout ratio remain a concern.
- Current valuation has priced in a flat dividend growth rate.
- Although free cash flow will be sufficient to cover dividend spending, earnings dividend payout ratio will remain at above 200% in the next few years.
- Due to high leverage, shareholders' equity would turn negative by 2016 if current dividend is maintained.
Windstream: Attractive FCF/Dividend Yield Play, Operating Fundamentals Hitting Positive Inflection Point
- Strong risk/reward with attractive 11.0% dividend ($1.00/share) and 16.5% FCF ($1.49/share) yields in a stable, consolidating industry.
- Revenue trends hitting positive inflection point; capex, opex and interest expense savings should offset potential cash tax increase, leading to FCF stabilization and dividend payout sustainability.
- Investors have been overly bearish on this name, nearly-fully discounting a 25-50% dividend cut, creating meaningful optionality in the case this event occurs (to which I assign a 25% probability).
Thu, Nov. 20, 6:04 PM
- Windstream's (NASDAQ:WIN) job cuts impact over 2% of its 13K-strong workforce. The telco expects record a $7.5M Q4 charge, and reap $20M/year in cost savings.
- The announcement comes two weeks after Windstream forecast its 2014 revenue growth would be at the low end of a prior guidance range of -2.5% to +1%.
Fri, Nov. 7, 12:10 PM
- Citing near-term growth and margin concerns, Stephens has downgraded Windstream (WIN -0.8%) to Equal Weight a day after the telco posted its Q3 results and stated its 2014 revenue growth would be at the low end of its prior guidance range. The firm's target has been cut by $4 to $11.
- Shares are off moderately, but above their morning lows. They fell 7.8% yesterday.
Thu, Nov. 6, 1:31 PM
- CenturyLink (CTL -6%) is selling off after providing soft Q4 guidance to go with a Q3 beat, and Windstream (WIN -5.6%) is doing the same after stating it now expects 2014 revenue growth to be at the low end of its prior guidance range.
- Frontier (FTR -3.2%), another telco with considerable rural and local voice exposure, is also declining. Frontier dropped on Tuesday after posting its Q3 numbers.
- D.A. Davidson is reiterating an Underperform on CenturyLink, arguably the most aggressive of the three telcos in trying to cut its voice exposure. "We don't see tremendous downside in the stock, but still think CTL may raise its capex budget more in 2015 as it rolls out Gigabit speeds in more cities and Prism TV to new markets. Our long-term target remains $40.”
- CenturyLink's dividend yield now stands at 5.2%, Windstream's at 9.6%, and Frontier's at 6.3%.
Thu, Nov. 6, 8:07 AM
- Windstream (NASDAQ:WIN) now expects 2014 revenue growth to be at the low end of a prior guidance range of -2.5% to +1%; consensus is for a 1.9% decline. Also, capex guidance has been cut to $775M from $800M-$850M.
- Adjusted free cash flow guidance of $775M-$885M and dividend payout ratio guidance of 68%-78% is affirmed.
- Q3 enterprise/small business service revenue rose slightly Y/Y to $752M, with Internet and data center service growth offsetting voice declines. Consumer revenue fell 0.3% to $321M; 1.4% broadband growth and service bundle uptake offset voice declines.
- Carrier revenue fell 10% to $151M, as wireless carriers abandoned Windstream's TDM (i.e. T1/T3) circuits in favor of Ethernet networks. Wholesale revenue fell 11% to $132M due to rate cuts.
- Business customer locations fell by 5.3K Q/Q to 580.7K. Consumer voice lines fell by 30K to 1.64M, consumer broadband lines by 9K to 1.14M, and digital TV customers by 4K to 390K. Carrier special access circuits fell by 4.2K to 84.3K.
- Windstream's anticipated telecom network REIT spinoff is expected to occur in Q1 2015.
- WIN -1.6%. Q3 results, PR.
Thu, Nov. 6, 7:12 AM
Wed, Nov. 5, 1:56 PM
Wed, Oct. 1, 6:15 PM
- Windstream (NASDAQ:WIN) has bought Business Only Broadband, a provider of fixed wireless broadband services in Chicago, NYC, North Jersey, and Milwaukee. Terms are undisclosed.
- The company plans to "expand the Business Only Broadband network into additional markets beginning in 2015." A map of Windstream's fiber network shows plenty of potential locations.
- Windstream's business revenue rose fractionally Y/Y in Q2 to $749M, as voice customer losses offset data growth.
Wed, Oct. 1, 9:54 AM
Tue, Sep. 30, 4:02 PM
- Windstream (WIN +1.3%) is using Infinera's (INFN -1.3%) optical transmission/switching hardware and management software to build the second phase of a 100G U.S. long-haul fiber network.
- Phase 2 covers 4,100 miles, and includes routes from Boston to Philly, Atlanta to Charlotte, and Kansas City to St. Louis. Phase 1 covered 5,300 miles.
- Infinera's flagship DTN-X 100G transmission/switching platform, replete with 500Gb/s photonic ICs, is being used. Windstream states the hardware will be able to scale to "single-card terabit super-channels and Terabit Ethernet in the future."
- Infinera bulls have often talked up the company's strong 100G exposure. Like peers, Infinera has been contending with soft North American wireline capex.
- Windstream's fiber expansion comes as the telco gets set to spin off its fiber and copper networks (along with some real estate) into a REIT.
Tue, Aug. 19, 5:14 PM
- Windstream (NASDAQ:WIN) COO Brent Whittington will be resigning effective Sep. 1. His duties will mostly be split up between operations EVP Mark Faris and engineering EVP/CTO Randy Nicklas, both of whom will report to CEO Jeff Gardner.
- Whittington has been Windstream's COO since 2009, and was CFO for four years prior to that. News of his resignation follows Windstream's REIT announcement, and comes amid a broader trend among U.S. companies to eliminate the COO position.
Tue, Aug. 19, 2:50 AM
- The National Association of Broadcasters has filed a lawsuit against the FCC's plans to auction off airwaves stating that the plan will incur expense and harm coverage of TV stations.
- The auction is set to take place next year, and will allow TV stations to take bids and sell their airwaves to meet the surging demand of mobile broadband.
- The new lawsuit challenges the regulations stating that it doesn't fully protect broadcasters that don't participate in the auction.
- Broadcasters say that they should not be forced into having their coverage area reduced or to pay out of pocket for the expense of moving their broadcast signal to a new frequency.
- Relevant tickers: CMCSA, TWC, ALLT, LVLT, CCOI, FTR, WIN, CTL, CHTR, CVC, DISH
Thu, Aug. 7, 10:31 AM
- Windstream's (WIN -2.3%) total service revenue fell 2% Y/Y in Q2 to $1.42B. Enterprise/small business service revenue rose slightly to $749M, but consumer fell 2.8% to $317M and carrier fell 6% to $155M.
- 10.7K business customers were lost Q/Q, lowering the total to 368K (-8% Y/Y). Consumer voice lines fell by 32.9K to 1.67M (-6% Y/Y), consumer broadband subs by 16.6K to 1.15M (-3%), digital TV subs by 4.8K to 394.1K (-5%), and carrier special access circuits by 4.9K to 88.5K (-14%).
- Adjusted free cash flow was $126M, better than net income of $14M. While revenue fell 2%, costs/expenses rose 2% to $1.3B.
- Windstream is affirming full-year guidance for -2.5% to 1% revenue growth, $800M-$850M in capex, adjusted free cash flow of $775M-$885M, and a dividend payout ratio of 68%-78%.
- Shares remain above where they traded before the telco's July 29 REIT announcement.
- Q2 results, PR
Thu, Aug. 7, 7:01 AM
Wed, Aug. 6, 1:01 PM
Tue, Jul. 29, 12:14 PM
- "I’m skeptical it can be replicated," says Elevation LLC's Stephen Sweeney about Windstream's (WIN +12.9%) REIT spinoff plans. "It’s very unclear if other large cap companies can have their companies viewed by the IRS as real estate."
- UBS also has its doubts: It thinks AT&T (T +3.3%) and Verizon (VZ +1.8%) would have to open up their networks to rivals if they were spun off into REITs, something it doesn't think the carriers will be keen on doing.
- Oppenheimer's Tim Horan is more positive, albeit while cautioning Windstream's spinoff isn't a done deal. "If successful with this restructuring, and there are obviously high regulatory barriers, this will be a game changer for the valuation of non-REIT infrastructure stocks in our industry.”
- AT&T, Verizon, Windstream, Frontier (FTR +11.7%), and CenturyLink (CTL +4.2%) have pared their morning gains a bit amid volatile trading on very heavy volumes. AT&T has seen 66M shares trade vs. a daily average of 19.3M; Frontier has seen 89M trade vs. an average of 6.9M.
- Enthusiasm about Windstream's spinoff stems not only from the tax benefits provided to REITs - American Tower's tax expense has been halved since it converted into a REIT in 2012 - but also from the potential for spinoffs to spark new M&A activity.
- Windstream CFO Tony Thomas: "The REIT is going to be uniquely positioned to be in a great spot to help unlock value at other companies ... We have a good understanding of how the REIT opportunity could work in the telecom landscape."
- Earlier: Telcos soar following Windstream's REIT announcement
Tue, Jul. 29, 10:14 AM
- Windstream's (WIN +22.3%) plans to spin off some of its telecom network assets into a REIT (following a favorable IRS ruling) has lit a fire under U.S. telecom carriers, as investors bet more REIT announcements will happen. Some might also be hoping REIT spinoffs spark additional M&A activity in an industry that has seen plenty of it.
- Frontier (FTR +15.8%) and CenturyLink (CTL +8.1%) are also off to the races, and AT&T (T +3.9%), Verizon (VZ +1.9%), and Sprint (S +2%) aren't doing badly either.
- Other gainers include Alaska Communications (ALSK +5.2%), TDS (TDS +4.1%), and Lumos Networks (LMOS +5.5%), as well as Level 3 (LVLT +5.9%) and merger partner TW Telecom (TWTC +5.2%). Level 3 posted a Q2 beat this morning.
- Windstream's spinoff will feature its fiber/copper networks and other real estate. The company expects to retire $3.2B in debt following the spinoff (expected to close in Q1 2015), and to have the REIT raise $3.5B in debt.
- Windstream plans to have an aggregate annual dividend of $0.70/share following the spinoff ($0.60 for the REIT, $0.10 for Windstream proper). That's down from a current $1.00/share.
WIN vs. ETF Alternatives
Windstream Holdings, Inc. is a provider of advanced communications and technology solutions, including managed services and cloud computing, to businesses nationwide. It offers broadband, voice and video services to consumers in primarily rural markets.
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