Frontier Communications (FTR, Financial) is assertively expanding the growing business of White Label Premium Tech Support. Also, Frontier’s Connecticut acquisition was successfully approved by the Federal Communications Commission or FCC. On the back of such initiatives, Frontier Communications will be able to deliver upside in the long run.
Why Frontier will keep getting better
Frontier delivered solid expense management capabilities in the second quarter and it’s believed to still have huge expense reduction opportunities in its present markets. The management of the expenses is crucial for maintaining solid free cash flow and healthy dividend. The management at Frontier recorded robust dividend payout ratio in the second quarter.
Currently, Frontier prioritizes on delivering the fundamental business and ensuring the success of the best quality integration of the Connecticut acquisition. Frontier is continuously identifying ways to optimize its tax structure converging with its business strategy.
The Frontier Secure attach rates for all residential broadband sales during the second quarter were 32%. Frontier Secure is increasingly adopted by customers and enables expanding revenue with lower customer churn.
A few residential areas are believed to get equipped for purchasing about 1 gig of broadband service.
Expanding its market
Frontier is believed to have significant opportunities for expanding its broadband market share currently below 25%, expanding the share growth through aligning its channel partners and resources.
Frontier made significant progress in reducing customer losses for the business, with second quarter losses of $2,190, nearly half the loss suffered during the first quarter.
There’s continued solid contribution from the distribution channel partnerships of Frontier. During the second quarter, alternate channels led to 36% of Broadband gross additions, an increase from 33% during the first quarter.
Frontier’s CPE pipeline continues to penetrate in all segments that include Next Generation 911 systems.
The Ethernet offerings for the quarter grew 34% over the same period last year. Frontier is investing more capital aggressively for expanding its Ethernet offerings to new areas coupled with upgrading its MPLS switching platforms.
Conclusion
The trailing P/E and forward P/E ratios of 64.00 and 29.09 point toward solid cost-cutting efforts of Frontier. However, it’s disappointing compared to the industry’s average of 12.83. The PEG ratio of -1.27 is disappointing again, compared to the healthy industry’s average of 2.12 and signifies no growth but decline. The profit margin of 3.86% is insignificant. The revenue per share and diluted EPs of 4.70 and 0.10 respectively suggests decline in shareholder earnings.
The quarterly revenue growth of -3.60% is bad compared to the industry’s average of 9.00% and indicate decline in company revenue. Still, the current ratio of 1.10 is marginally healthy and signifies the robustness of the company’s balance sheet. Finally, the investors are advised to stay away from the stock as of now till a major turnaround occurs looking at the poor long-term growth prospects, reflected by the CAGR for the next 5 years per annum of -25.20%, below the industry’s average of 9.01%.
