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Frontier’s 4Q15 Earnings Surprise Wall Street Analysts, Again

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Frontier’s earnings in 4Q15

Frontier Communications (FTR) reported its fiscal 4Q15 results on February 23, 2016. On an adjusted basis, Frontier surprised Wall Street analysts with positive earnings. Analysts were expecting a loss for the quarter. Frontier had an adjusted EPS (earnings per share) of ~$0.05 for 4Q15. The 4Q15 consensus estimate of Wall Street analysts was a loss per share of ~$0.03.

As we can see in the above bar graph, Frontier Communications beat Wall Street consensus earnings estimates for three quarters in a row. Earlier in 3Q15, Frontier had adjusted earnings when these analysts were expecting it to have a loss. In 2Q15, the company’s adjusted earnings were ~3.4% above analysts’ consensus estimate. However, in 4Q14 and 1Q15, Frontier’s earnings were significantly lower than Wall Street expectations.

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Frontier’s margins in 4Q15

On a YoY (year-over-year) basis, Frontier’s adjusted EPS increased sharply by ~25% for 4Q15. When these results were announced, the company’s stock price rose ~12.6% from the previous day’s close.

During the quarter, Frontier’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased by ~5.4% YoY to reach ~$0.6 billion. YoY, the carrier’s adjusted EBITDA margin contracted by ~0.2% in 4Q15.

Instead of taking direct exposure to stocks of players in the US wireline market, you can consider a diversified exposure to the market by investing in the SPDR S&P 500 ETF (SPY).

SPY held a total of ~2.4% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of December 2015.

In the next part of this series, we’ll see why Frontier’s revenues were lower than analyst expectations.

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