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Why Intelsat Stock Just Popped 8%

By Rich Smith - Feb 20, 2020 at 11:43AM

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Intelsat beat earnings -- and is working to get more money out of the FCC.

What happened

This is the day that Intelsat (INTE.Q) shareholders have waited for. At long last, Intelsat stock is going up for a reason that investors can easily understand: earnings.

This morning, shares of the satellite communications concern jumped 8% (as of 11:55 a.m. EST) in response to fiscal fourth-quarter earnings results that exceeded expectations. Admittedly, Intelsat exceeded those expectations as it lost money -- but at least it lost less than expected.  

Satellite transmitting to Earth

"Hey, Houston! Did Intelsat just say it might get more money?" Image source: Getty Images.

So what

So what exactly did Intelsat report this morning?

For fiscal Q4, Intelsat lost $0.81 per diluted share on sales of $517 million. That doesn't sound great at first, but when you consider that Wall Street had predicted a bigger loss ($0.94) on smaller sales ($500.9 million), the quarter was clearly a "win" for Intelsat.  

Sales declined 5% year over year, yet Intelsat's per-share loss was flat against year-ago numbers.

For the full year, sales of $2.1 billion likewise fell 5%, while losses swelled 41%. Here, too, it appears that Intelsat made progress in Q4, by slowing the rate at which it loses money. Management also noted that Intelsat generated positive free cash flow for the year -- $70.2 million.

Now what

Looking ahead, three things stand out.

First, new guidance for fiscal 2020 anticipates somewhere between $1.93 billion and $1.98 billion in revenue. That's not particularly good news given that Wall Street is hoping to see Intelsat book $1.98 billion -- period. Intelsat's guidance range suggests that hitting that target is no sure thing.

Second, Intelsat updated its guidance for future capital spending:

  • $200 million to $250 million in 2020;
  • $225 million to $300 million in 2021; and
  • $225 million to $325 million in 2022.

Without knowing cash flow, we can't figure an exact free cash flow for any of these years -- but just knowing the capital expenditure numbers is a start.

Finally, Intelsat confirmed today that the FCC is offering it about $4.85 billion in proceeds from the planned sale of C-band spectrum currently controlled by Intelsat. Consider that a starting position, though, because Intelsat is working "on successfully improving the draft order proposed by the FCC while preserving all our rights."

Translation: Intelsat could get more than $4.85 billion.

And the more it gets, the higher Intelsat stock should go.

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