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



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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