Shares of Frontier Continue to Fall in May 2017
Shares fell 17% in the last week
Shares of telecommunications company Frontier Communications (FTR) fell 17% in the week ended May 12, 2017, after the company announced its 1Q17 results. FTR’s revenue rose 74% YoY (year-over-year) to $2.4 billion in 1Q17, primarily due to its acquisition of Verizon’s (VZ) wireline assets.
The company posted net income of -$129 million, or -$0.11 per share, compared to analysts’ consensus estimate of -$0.05 per share. Another decision that drove FTR’s share price fall was the company’s decision to cut its dividend by 62%, from $0.11 per share to $0.04 per share.
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FTR attributed the dividend cut to its push to achieve financial flexibility. CEO Dan McCarthy stated, “As we continue to execute on our strategy to deliver on the full potential of our strong assets and generate additional cash flow, we will optimize our capital allocation to ensure we strike a balance between investing in the business, paying down debt and returning capital to shareholders.”
Outlook for 2017
Frontier Communications expects customer and revenue trends to improve in 2017. It expects synergy realizations from the integration of AT&T’s (T) and Verizon’s (VZ) wireline businesses in the Connecticut and CTF (California, Texas, and Florida) markets. Frontier completed its acquisition of AT&T’s and Verizon’s wireline businesses in October 2014 and April 2016, respectively.
As we can see in the chart above, FTR expects its capital expenditure to be between $1 billion and $1.3 billion in 2017, with adjusted free cash flow of between $800 million and $1 billion.