Windstream Holdings, Inc. (NASDAQ: WIN) is scheduled to report its earnings Thursday before the markets open. This report may be especially difficult for analysts to make heads or tails of because its spin-off has just been completed. However, 24/7 Wall St. has a Merrill Lynch report ahead of the earnings which clarifies what to expect.

Windstream separated from Communications Sales and Leasing on April 24th and Merrill Lynch initiated coverage on Communications Sales and Leasing Inc. (NASDAQ: CSAL) with a Buy rating. The brokerage firm mentioned in its report that it is interested in any insights that Windstream can provide into entering co-investment opportunities with Communications Sales and Leasing and the effect on Windstream’s capex guidance which is $825 million to $875 million.

Merrill Lynch expects Windstream to reiterate 2015 guidance covering revenue and cash taxes. It is also looking for 2015 revenue of $5.69 billion, a drop of 2.4% year over year, versus guidance of $5.58 million to $5.80 million and cash taxes of $20 million. Windstream is expected to update its guidance for adjusted EBITDA to account for its lease payment to Communications Sales and Leasing and the brokerage firm estimates adjusted EBITDA to be $1.94 billion, or $1.4 billion adjusting for its lease payment, on margins of 34.1% compared to guidance of 34% to 34.5%.

The Business segment represents approximately 62% of Windstream’s total revenue and success going forward will depend on the company’s ability to drive growth in this segment. Merrill Lynch estimates Business revenue will drop 1.4% year over year in the first quarter of 2015 and slip 1% year over year for the full year.

Windstream now reports total business customer locations, rather than access lines or Internet connections. Merrill Lynch estimates customer location losses of 4.7% year over year.

In Merrill Lynch’s report, the firm detailed:

The FCC announced on April 29th the funding amount each carrier is eligible to receive under CAF Phase II for rural broadband regulatory support. Each carrier must decide by August 27th to accept the state by state based offer. Windstream is eligible for $179 million and we are interested if Windstream has any insight into the accounting treatment for the funds.

As a result, Merrill Lynch had a Buy rating for Windstream with a price target of $16.

Shares of Windstream were down 4.5% at $10.36 Wednesday afternoon. Note that Windstream is still paying an outrageous annual dividend of $1.00 which equates to a 9.7% yield.

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