What’s in Store for Windstream’s Enterprise Component?

In an earlier part of this series, we learned that Windstream Holdings’ (WIN) enterprise revenue continued to grow in 1Q16. This stream increased by ~1.9% YoY (or year-over-year) to reach ~$0.51 billion during the quarter. The company generated revenue of ~$1.4 billion during the quarter. The growth in the enterprise component’s revenue was driven by data and integrated service revenue during the quarter.

During the quarter, the profitability margin of the segment continued to increase YoY. As we can observe in the bar chart above, the telecom player’s enterprise margins expanded from ~10.3% in 1Q15 to ~13.7% in 1Q16. The company expects the improvement in these margins to continue.

Discussing enterprise margins during the 1Q16 conference call, Anthony Thomas, Windstream’s CEO and president, said, “we anticipate exiting the year in the high teens. Our goal of 20% margins for the next three years is looking very achievable.” He also mentioned, “we see a lot of opportunity associated with the costs we pay other carriers.”

He said, “products we’re beginning to sell within the Enterprise business have different margin characteristics.” He added, “What you’re going to see us increasingly sell is a suite of products that include our own last mile fiber or fixed wireless network connections.”

Instead of getting direct exposure to US telecom companies, you can consider diversified exposure to the space by investing in the SPDR S&P 500 ETF (SPY).

The ETF held a total of ~2.7% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of April 2016.