Why Windstream Earnings Are So Attractive

By Chris Lange Published Aug 6, 9:40AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Windstream Holdings Inc. (NASDAQ: WIN) released its second-quarter earnings report Thursday before the markets opened. The company had a net loss of $0.48 per share on $1.4 billion in revenue, compared to Thomson Reuters consensus estimates of a net loss of $0.61 per share on $1.42 billion in revenue. In the second quarter of the previous year, the company posted EPS $0.24 and revenue of $1.47 billion.

The company gave guidance for the 2015 full year. Windstream expects service revenue to range of -3% to flat and capex to be in the range of $825 million to $875 million. There are consensus estimates of a net loss of $1.67 per share on $5.64 billion in revenue.

In connection with the real estate investment trust (REIT) spinoff, Windstream paid down $3.2 billion in debt, which will provide approximately $170 million in annual interest savings. In addition, the company retained just under 20% of CS&L, currently valued at $624 million, and are committed to using the proceeds to reduce debt.

In terms of its segments, Windstream reported:

Consumer service revenues were $314.
ILEC small business revenues were $108 million.
Carrier Service revenues were $156 million.
Enterprise service revenues were $485 million.
CLEC small business service revenues were $146 million.

ALSO READ: 8 Large Companies Valued Under 10 Times Earnings

In the report, Windstream announced a share repurchase program of up to $75 million, which is expected to be completed by the end of 2016. Additionally, the board of directors declared the regular quarterly dividend of $0.15 per share to shareholders of record as of Sept. 30, 2015.

Tony Thomas, president and CEO of Windstream, said:

In order to create value for our shareholders, the board of directors has authorized a share repurchase program of up to $75 million. Windstream stock is significantly undervalued and a share buyback is an attractive investment and an efficient way to return capital to shareholders.

Thomas continued:

We are on the right track strategically and financially. The new business unit structure has sharpened our focus and is driving operational excellence. The board and management team are confident in the future and remain focused on enhancing profitability and creating value for our shareholders.

At the end of the second quarter, the company had cash and cash equivalents of $47.0 million, compared to $27.8 million at the end of December 2014. Year to date, adjusted free cash flow was $141 million.

Shares of Windstream were up 13.7% just after Wednesday opening bell, at $5.89 on its 52-week trading range of $4.42 to $18.14. The stock has a consensus analyst price target of $14.33.

ALSO READ: Merrill Lynch’s 3 Buy-Rated Stocks Breaking Out on Price and Volume

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.