Please ensure Javascript is enabled for purposes of website accessibility

Why Windstream Holdings, Inc. Gained 48% in August

By Anders Bylund - Sep 2, 2015 at 9:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Did the telecom services operator start a long-term rise in August, or is it just taking a temporary break from the spring and summer's brutal plunge?

WIN Chart

WIN data by YCharts.

What: Shares of telecom services operator Windstream Holdings (WINMQ) soared 48.2% higher in August, according to data from S&P Capital IQ. The stock is still trading 32% below the levels seen in late April, when the company spun out its infrastructure assets as Communications Sales & Leasing (NASDAQ: CSAL).

So what: After free-falling ever since that game-changing CS&L spinoff, Windstream's shares finally caught a break in August. It started with a strong second-quarter earnings report, where the company met Wall Street's revenue targets and delivered a far smaller net loss than expected. That led to an avalanche of bullish earnings revisions, as five of the six analyst houses following Windstream upped their estimates for the third and fourth quarters.

These analyst actions didn't go unnoticed, and Windstream's shares followed suit.

Now what: Did that solid report put a permanent end to Windstream's sliding share prices? Honestly, it's still too early to tell.

You should note that the stock kept climbing even as the broader market saw a number of significant drops in the second half of August, which adds credibility to the rising trend.

However, investors and analysts are still trying to figure out how this new two-headed beast will work in real life. Windstream blazed a brand-new trail here, since no telecom has ever tried to classify its networking hardware and real estate as a REIT holding company before.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Industry peers have been keeping a close eye on this process ever since Windstream announced it in 2014, hoping that the regional telecom had found a clever way to minimize tax bills, maximize operating flexibility, and lighten a debt-loaded balance sheet. But none of them have officially followed suit yet. They are still waiting for signs of a clear-cut business advantage -- not just a different way of doing business.

The total market value of these two companies stands at $3.8 billion today, down 27% from the $5.2 billion sum seen right after the split. At the end of July, the combined cap stopped at $3.6 billion, so CS&L and Windstream increased their overall value by 6% in August. So far, the CS&L separation has destroyed more shareholder value than it created. Like the telecom industry at large, Windstream investors are still looking for that decisive payoff. August may have fired the starting shot for a long-term rise, but only time will truly tell.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Windstream Holdings, Inc. Stock Quote
Windstream Holdings, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.