Frontier Communications Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Frontier Communications (NASDAQ: FTR  ) is one of them. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

Rural telecom companies look attractive because of their high dividends, and Frontier has one of the best yields in the market. But recent pullbacks from competitors have led to questions about payout sustainability in the industry. Let's take an early look at what's been happening with Frontier Communications over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Frontier Communications

Analyst EPS Estimate

$0.07

Change From Year-Ago EPS

0%

Revenue Estimate

$1.24 billion

Change From Year-Ago Revenue

(3.6%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Frontier Communications connect with profits?
Analysts have held the line on their estimates for Frontier, keeping their guess for earnings unchanged over the past few months. The stock showed more optimism for a while during the market's overall rally, but lately, it has pulled back, leaving it down about 4% since mid-November.

Frontier specializes in bringing phone and broadband access to rural communities across the country. With its buyout of landline assets from Verizon (NYSE: VZ  ) having been completed back in 2010, Frontier became a much larger business, taking on a massive debt load but grabbing up a huge new swath of revenue. Verizon was willing to give up those assets in favor of getting more resources to build out its wireless network, but with all the cash flow the business generates, Frontier was able to pay investors impressive dividend yields.

The problem Frontier and its peers face is how to keep those payouts high in a declining business where customers are abandoning landlines and other old technology in favor of wireless connectivity. Frontier has had to cut its dividend twice in the past couple of years, and last week, CenturyLink (NYSE: CTL  ) made its own surprise dividend cut, slashing its payout by 26% and spurring an exodus of investors away from rural telecoms. Even Windstream (NASDAQ: WIN  ) , which affirmed its $0.25 per share dividend earlier in the month, saw its shares drop substantially on CenturyLink's news, and fears of a third dividend cut from Frontier sent its stock downward as well.

The keys to Frontier's quarterly report will be whether its inexorable declines in customer counts continue and the extent to which the company is able to pull in broadband as well as higher-margin business services. If Frontier is able to keep its dividend steady, investors could celebrate even tepid results from the rural telecom.

Learn more
We've put together the complete picture of Frontier's business in a premium research report on the rural telecom. Inside, you'll learn whether Frontier is worth buying, and we'll walk you through all of the key opportunities and threats facing the company. Better yet, you'll receive a full year of updates. Click here to learn more.

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Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On February 19, 2013, at 8:26 PM, jmalt1 wrote:

    The Management of Frontier has done nothing for the benefit of Shareholders. They cut the dividend to 75 cents to complete the purchase from Verizon.

    Stated that the 75 cent dividend was safe and secure. Sure it was. At the end of that year Management cut the dividend again. The share price has been decimated since this debacle has been carried out. I don't even know how Management can ask for a paycheck! Sometimes bigger is not always better! Oh yes the yield looks great because share holders saw their stock go from 9 dollars and change to 4 dollars and change. Great job Management!!!

  • Report this Comment On February 19, 2013, at 11:54 PM, crazyeconprof wrote:

    I caught the falling knife (FTR) at under $4 awhile back ... so its been good to me ... paying 10% yield and holding value. I hold 'cuz I think they can and will hold the line on this divy.

    Good cash flow. Co. needs to bring debt & int. exp. down to get on a virtuous cycle (more cash to pay debt = less debt = lower int. = more cash = ...)

    and $4 will seem cheap.

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