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High-Speed Broadband Can Continue Driving Frontier Communications Higher
- Frontier Communications is tapping the growing demand for high-speed broadband by deploying new products.
- Frontier's products are gaining good adoption as it is gaining market share.
- Frontier's AT&T Connecticut acquisition will increase cross-selling opportunities for the company.
- Frontier's focus on infrastructure growth is another catalyst worth watching.
Frontier Ticks All Boxes On Its Way To Earning Bullish Thesis
- Intelligent strategic initiatives for consistent enhancement and expansion of broadband network will keep its subscriber base healthy.
- Recently completed T’s Connecticut asset acquisition will contribute towards long-term growth of top and bottom-line numbers.
- Stock offers safe and high dividend yield, making it good investment for dividend investors.
Update: Frontier Q3 Earnings Report Shows Fewer Broadband Net Adds
- Quarterly broadband gains solid, although lowest since 2012.
- Opinion about sustainability of the dividend remains unchanged.
- Broadband growth less than expected, but still strong enough to maintain recommendation to buy Frontier for dividend income.
- Q3 2014 revenue was $1,140.9 million vs. consensus of $1,141.6 million and Q3 2013 of $1,185.3 million.
- The dividend payout ratio in Q3 increased to 67% of free cash flow, compared to 46% last quarter and 43% in Q3 2013.
- In light of a higher dividend payout ratio and customer volume contracting more than prices increasing, I am changing my thesis to be less optimistic on FTR.
Update: AT&T Closes On $2 Billion Sale Of Connecticut Properties To Frontier Communications
- AT&T and Frontier announce the closing of the sale of AT&T's wireline assets to Frontier.
- Opinion about improved dividend coverage for Frontier remains unchanged.
- Transaction closes in time frame anticipated.
- The Connecticut Public Utilities Regulatory Authority (PURA) approves the proposed acquisition.
- Opinion about improved dividend coverage remains unchanged.
- Last regulatory approval required for 2014 closing.
- Effective and correct strategic efforts helping strengthen subscriber base.
- Through aggressive efforts to expand and enhance services, FTR moderating top-line decline.
- Stock offers potential price appreciation of 8%.
AT&T Is Selling, Frontier Is Buying, Who's Right? Part 2
- Frontier erred in 2010 when it bought a significant portion of Verizon's assets.
- Are they making the same mistake with this purchase from AT&T?
- Acquisition should close next month.
- Frontier Communications obtains financing for acquisition from AT&T.
- Opinion about improved dividend coverage remains unchanged.
- Acquisition remains on track for second half of 2014 closing.
Frontier Communications: Capital Structure Doesn't Make Sense
- Frontier Communications has a capital structure too focused on maintaining a historical dividend.
- High debt load causes interest expense to hit operating income.
- Stock is reasonably valued but the large stock gains leave limited upside from these levels.
Frontier Communications: 6% Yield And REIT Structure Upside
- Investors speculate up to 25% of FTR's cash flow could be spun out into a REIT.
- A recent deal with AT&T should increase revenue, lower costs and improve cash flow.
- Current dividend yield is 6%.
- Target price is $8.00/share.
Frontier Communications Cements Place In Industry; Works On Growing Top-Line Numbers
- Company’s commitment towards investing in network enhancement and up-gradation has potential of growing top-line in future.
- Acquisition of T’s assets will strengthen FTR’s cash flows and top-line growth.
- Sustainable dividend yield of 7% makes stock good investment for dividend investors.
Frontier Earns Neutral Thesis Despite Attraction For Income Seekers
- Company continues to offer a sustainable dividend yield.
- Has managed to build solid broadband momentum, which will offer attractive growth prospects for future.
- Free cash flows will be pressurized because of high debt repayment coming in the future.
Frontier Communications Is Well-Positioned To GrowIAEResearch • Mon, Aug. 18
- With shares rising about 39% in the last six months, Frontier has been one of the best performers in the sector.
- The completion of AT&T's Connecticut assets will result in a considerable increase in the customer base of the company and help it tackle rising churn rate.
- Frontier's strategy to focus on high-growth high-margin areas will result in sustainable long-term growth for the company.
- Frontier receives Connecticut approvals and reschedules closing of acquisition from AT&T.
- Opinion about improved of dividend coverage remains unchanged.
- Acquisition was anticipated to close in second half of 2014.
Frontier Communications Moves Another Step Towards Increasing Dividend Coverage
- FCC approves Frontier's acquisition of AT&T's Connecticut wireline business.
- Improves dividend coverage and increases leverage.
- Connecticut PURA approval is next.
- Frontier Communications has huge debt and its earnings are expected to decline in the next five years, so it might be forced to cut its high dividend yield.
- Frontier, however, is making aggressive investments to improve its business, and is gaining market share in its end-markets that could lead to long-term growth.
- Frontier's cash flow generation is strong, and this should help the company in paying out its dividend going forward.
Frontier Communications: Solid Growth Potentials Ensure One For The Future
- Company has been steadily moderating revenue declines in recent quarters.
- Expanded network capabilities, intelligent pricing initiatives and attractive packaging strategies will add to FTR’s broadband subscriber base.
- T Connecticut acquisition has significant promise to grow subscriber base and performance.
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%.
Mon, Nov. 3, 4:54 PM
- Thanks to voice disconnections, Frontier's (NASDAQ:FTR) residential customer base fell by 21.8K Q/Q in Q3 to 2.74M (a smaller drop than Q2's 31.8K), and its business customer base fell by 3.4K to 260.8K (a bigger drop than Q2's 2.2K).
- On the other hand, the telco added 21.9K broadband subs, growing its total base to 1.95M. Video subs rose by 2K to 395.9K. The recently-closed AT&T deal will boost Frontier's sub counts for both businesses.
- Voice services revenue -8% Y/Y to $471.8M; data/Internet services -1% to $468.8M; switched access/subsidy -8% to $124.2M; other revenue +10% to $76M.
- Op. cash flow margin slipped to 42% from 44.9% in Q2 and 41.5% a year ago. Free cash flow (historically lumpy) fell to $149M from $215.9M in Q2 and $232.2M a year ago. The dividend payout ratio was a steep 67%.
- FTR -0.5% AH. Q3 results, PR.
Mon, Nov. 3, 4:03 PM| Comment!
Sun, Nov. 2, 5:35 PM
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Tue, Oct. 28, 12:33 PM
Fri, Oct. 24, 11:02 AM
- Frontier's (FTR -0.7%) $2B purchase of AT&T's Connecticut wireline assets has officially closed. Connecticut's AG had signed off on the deal in August.
- The purchase gives Frontier 875K voice, 415K data, and 215K video connections, and 2.5K employees. Frontier respectively had 1.93M and 393K broadband and video subs, and 13.9K employees, at the end of Q2.
- Frontier has promised to invest $63M over the next three years to expand U-verse service coverage and increase broadband speeds in the state. The telco predicts it will "realize significant cost savings from leveraging its current infrastructure in supporting the new Connecticut business operations."
Wed, Sep. 3, 9:41 AM
- Citing AT&T deal risk and industry challenges, Morgan Stanley has downgraded Frontier (FTR -1.2%) to Underweight. Its target is $5.20.
- The downgrade comes a month after Frontier posted a Q2 report featuring light subscriber figures.
- Separately, Frontier has announced it's selling $1.55B worth of senior notes - $775M are due in 2021, and an equal amount in 2024. The proceeds will be used to help finance the AT&T deal.
- Frontier had $7.9B in debt as of June 30, and $805M in cash.
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
Tue, Aug. 12, 6:44 PM
- The Connecticut Attorney General has signed off on Frontier's (NASDAQ:FTR) $2B purchase of AT&T's wireline assets in the state, following a series of commitments.
- Among other things, Frontier has promised not to hike "the basic primary residential rate in effect for transferred [local] exchanges" for 36 months, and to offer its basic and standalone broadband services at or below current prices.
- Frontier is also committing to $63M in broadband-related capital investments within Connecticut from 2015-2017.
- Connecticut's public utilities regulator still has to sign off. Frontier originally planned for the acquisition to close during 2H14.
Tue, Aug. 5, 5:34 PM
- Frontier (NASDAQ:FTR) is reiterating full-year guidance for free cash flow of $725M-$775M and capex of $575M-$625M. The forecasts exclude the AT&T deal.
- Voice line disconnections led residential customers to fall by 31.8K Q/Q in Q2 to 2.762M, and business customers by 2.2K to 264.2K. Those figures compare with Q1 declines of 10K and 4.4K. Residential churn rose to 1.8% from 1.64% a year ago, ARPU rose by $0.58 to $59.64.
- Broadband subs grew by 27.7K to 1.93M, and video subs by 3.6K to 394K; those numbers are down from Q1's 37.2K and 5K.
- Total voice revenue -8% Y/Y to $471.6M, data/Internet revenue -1% to $462.7M, other customer revenue +12% to $79M, switched access/subsidy revenue -3% to $134M.
- Free cash flow was $215.9M vs. $235.1M in Q1 and $175.9M a year ago. Frontier's Q2 dividend payout ratio was 46%, up from Q1's 43% but down from 57% a year ago.
- Q2 results, PR
Tue, Aug. 5, 4:04 PM
Mon, Aug. 4, 5:35 PM
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Wed, Jul. 30, 5:58 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.
Tue, Jul. 29, 9:08 AM
FTR vs. ETF Alternatives
Frontier Communications Corporation provides communication services to rural areas and small and medium-sized towns and cities in the U.S. Its offerings include data and Internet services, local and long distance voice services, and access services.
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