Windstream Holdings Earnings: What to Expect Thursday

Will cost-cutting measures prove enough to help the rural telecom sustain its dividend?

Feb 26, 2014 at 11:00AM

Windstream (NASDAQ:WIN) will release its quarterly report on Thursday, and even though the company has already declared its quarterly dividend at current levels, investors still worry whether the rural telecom will be able to sustain its lucrative double-digit payout yield in the long run. With a yield that even eclipses those of rivals Frontier Communications (NASDAQ:FTR) and CenturyLink (NYSE:CTL), Windstream faces the constant challenge of producing enough earnings and cash flow to support payouts while keeping its balance sheet healthy in an industry that has a history of declining revenue.

The appeal of Windstream, Frontier, and CenturyLink's business model is that older legacy assets such as landlines produce substantial amounts of cash without a huge amount of investment. Yet the popularity of these services is in steady decline, forcing Windstream and its peers to find ways to get current customers to tap into other, more profitable services including broadband Internet and video. Frontier and CenturyLink have both reduced their dividends in the past as a reflection of the natural decline in their respective businesses and to preserve cash for other purposes, but Windstream has thus far resisted that impulse. Let's take an early look at what's been happening with Windstream over the past quarter and what we're likely to see in its report.

Image courtesy Chas Redmond, via Wikimedia Commons.

Stats on Windstream

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$1.50 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Windstream earnings satisfy investors?
In recent months, analysts have been a bit more cautious about Windstream earnings, keeping their fourth-quarter estimates steady but cutting their full-year 2014 projection by $0.02 per share. The stock has mostly held its own, falling 1% since mid-November.

Windstream's third-quarter results were consistent with the declining nature of its older businesses. The company emphasized growth in business services and consumer broadband revenue, with business data and integrated services sales rising 5% on a 6% jump in the number of enterprise customers generating more than $750 in monthly revenue. Those results only partially offset a 3% decline in overall consumer service revenue, and even though adjusted free cash flow climbed by more than half from year-ago levels, investors were disappointed with the results. The stock also got downgraded after the report, with Morgan Stanley citing fears about dividend sustainability.

A big problem for Windstream is that it lags behind rival Frontier in capturing greater numbers of subscribers for its higher-value offerings. Even as Frontier managed to add net subscribers to its high-speed Internet and video services, Windstream saw declines. CenturyLink has even managed to do well holding onto its voice customers while getting people to sign up for other services. Meanwhile, AT&T (NYSE:T) has also had success in luring customers to its higher-margin offerings, posing a potentially larger challenge given the company's greater name recognition across the country. Frontier's deal to acquire AT&T's Connecticut-based landline and fiber assets will also make Frontier a larger force to be reckoned with in the telecom space.

In the long run, Windstream also must address its balance sheet. With a debt-to-equity ratio that far eclipses Frontier and other industry players, Windstream is vulnerable to rising interest rates, although it has taken steps to refinance and take advantage of relatively low rates now. Even though the company assures investors that its cash flow is substantial enough to cover dividends, the amount it pays out is dangerously high compared to the money it's bringing in, especially relative to the Frontier dividend that has been reduced in recent years. Measures such as Windstream's recent decision to lay off 400 workers should help on that front, but continued efforts will be needed to ensure that the telecom can keep its expenses in check and retain more of its hard-earned cash to pay to shareholders.

In the Windstream earnings report, watch to see how the company plans to keep bolstering its business services and its higher-margin consumer broadband and video offerings. Without more success on those fronts, Windstream will see increasing pressure on its dividend in the years to come.

Looking for real growth
You don't have to rely on stocks in declining industries for all your income. Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Click here to add Windstream to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers