How Does Frontier Communications Compete on Value Proposition?



Frontier Communications’ size

So far in this series, we’ve looked at expectations for Frontier Communications’ (FTR) 1Q16 earnings. The telecommunications, or telecom, company will announce its results on May 3, 2016. In this part of the series, we’ll look at some value-centric measures of Frontier Communications. Let’s start with the scale of the company compared with that of other players in the US wireline space.

As we can see in the above chart, as of April 22, 2016, Frontier Communications has a market capitalization of ~$6.6 billion. Meanwhile, US wireline peers Windstream Holdings (WIN) and CenturyLink (CTL) have market capitalizations of ~$0.84 billion and ~$17.1 billion, respectively.

Integrated telecom giants Verizon Communications (VZ) and AT&T (T) have market capitalizations ~$206.2 billion and ~$234.2 billion, respectively.

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Valuation multiples of FTR and some of its peers

As of April 22, 2016, Frontier Communications and CenturyLink have forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiples of ~5.8x and ~5.5x. AT&T and Verizon have EV-to-EBITDA multiples of ~6.5x and ~6.7x, respectively.

Frontier Communications’ dividend yields

As of April 22, 2016, Frontier Communications has a forward annual dividend yield of ~7.8%. Both Windstream and CenturyLink have a forward annual dividend yield of 6.9%. Meanwhile, integrated players Verizon and AT&T have forward annual dividend yields of ~4.5% and ~5.1%, respectively.

For diversified exposure to select US telecom companies, you might consider investing in the SPDR S&P 500 ETF (SPY). The ETF had a total of ~2.8% of its holdings in AT&T (T), Verizon (VZ), CenturyLink (CTL), Level 3 Communications (LVLT), and Frontier Communications at the end of March 2016.

In the next part of this series, we’ll look at what Wall Street analysts recommend for Frontier Communications ahead of 1Q16 earnings.


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