Windstream (WIN, Financial) recently released results for the second quarter, which were in line with the company’s expectations. Its solid growth was highlighted by the continued traction in its business data and integrated services, and improvements in the consumer channels. However, the results failed to impress investors as the company’s earnings missed analysts’ estimates. Management is making moves for gaining market share. Windstream has plans to spin off certain telecommunications network assets. It intends to create an independent, publicly traded, real estate investment trust. Let us take a look at the underlying business of Windstream.
Windstream is improving
Windstream posted revenue of $1.5 billion. The revenue of the company fell by 2.4%. On the earnings part, Windstream didn’t match consensus estimates. It posted EPS of $0.04, which missed analysts’ estimates of $0.08 per share.
But, Windstream is seeing slow improvement. The company didn't perform well, but its growth rate is improving. Windstream sees good opportunities in other consumer channels; therefore, it is separating its business into two arms by spinning off a few of its network assets to create an independent real estate investment trust.
This transition is expected to benefit Windstream in many ways. It is expected to result in a lower leverage for Windstream. Also, Windstream is making significant investments to strengthen its network. This will enable it to enhance its speed and provide best in class services to customers.
Working on improvements
Besides this, Windstream is taking aggressive marketing programs to strengthen its sales. With this it is expecting robust sales in the future supporting its effort to move up in the market. Windstream has made several changes throughout the organization in the past, including sales and service delivery. The company thinks that this initiative will take some time to deliver results, but on the back of it, Windstream looks optimistic about its growth prospects.
Moving ahead, Windstream continues to walk the road toward its goal of unifying its enterprise systems. To make this happen, the company is moving provisioning, billing and sales management systems onto a single platform, enabling effective and efficient management of all enterprise customers. This single interface for all enterprise customer functions will be a competitive advantage for Windstream, which will enable it to better serve its customers.
Also, Windstream is altering its broadband network to create additional opportunities for it to gain customer attention. It is transitioning its broadband network to an IP network. Windstream is investing in IP services and fiber expansion to further support this transition, and by 2018, Windstream is expecting to expand its 10 meg internet service to over 80% of the customers.
Windstream is also working on its sales management platform with various tools. It has an advanced lead generation tool which will help the company to increase its sales by maximizing opportunity. Moreover, Windstream is seeing positive growth prospects in its carrier business on the back of solid growth in the Ethernet services.
Conclusion
Looking at the fundamentals, Windstream is highly valued and this is not a good sign. Its forward P/E is more than its trailing P/E, which indicates that the company will remain under pressure. Also, its earnings growth for the next five years is very poor with a CAGR of -8.70%. Considering all these statistics, investors should include other stocks in their portfolio and avoid Windstream until the company shows positive signs and improves its valuation.
