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Why Intelsat Stock Just Crashed to Earth

By Rich Smith - Feb 26, 2018 at 2:32PM

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And why there's at least a faint hope it can soon bounce back.

What happened

Shares of Intelsat (INTE.Q) are down 14.7% as of 12:55 p.m. EST Monday after the communications satellite specialist reported Q4 2017 earnings far short of analyst estimates.

So what

Wait. Did I say "earnings?" I meant losses. Wall Street had been prepared to hear Intelsat report a per-share loss of up to $0.25 Monday morning. Instead, the Luxembourg-based company announced that it lost $0.75 per share -- and $0.98 pro forma (the form in which Wall Street prefers to use when making its earnings prognostications these days). Thus, Intelsat's actual losses were about four times as big as projected.

This was especially surprising, inasmuch as Intelsat reported sales ($538.1 million -- still down 2% over year) that actually came in ahead of estimates ($537.2 million). And with sales flagging, backlog at the company declined as well -- down $100 million from Q3's tally at $7.8 billion.

For the full fiscal year 2017, Intelsat said its sales were $2.15 billion (also down 2% year over year) and a loss of $1.50 per share -- versus last year's $8.36 per share profit.

A satellite beaming down light to a sphere representing Earth.

Intelsat beams down a data cache of financial information. Image source: Getty Images.

Now what

That is why investors were upset with Intelsat's results for 2017, but looking to 2018, Intelsat management predicted it will book between $2.06 billion and $2.11 billion in sales this year, so down about 4%. Management did not give GAAP guidance for earnings, but said its "adjusted EBITDA" -- a very pro forma figure, and not something to base a valuation on -- will be between $1.56 billion and $1.6 billion.

Management also laid out a plan for capital spending in the amounts of from:

  • $375 million to $425 million in 2018
  • $425 million to $500 million in 2019
  • $375 million to $475 million in 2020

While significant, all of these amounts fall below the $462 million Intelsat spent on capital investment in 2017, and even further below the $684 million investment laid out in 2016. So after all the bad news, at least Intelsat ended on a positive note -- if the company can keep cash flowing at the rate it did last year ($464 million) there's a decent chance Intelsat will report positive free cash flow in any one of, or even all three of the next three years.

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