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No ‘Buy’ Ratings for Frontier despite Improved Losses in Q4 2018

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Nov. 20 2020, Updated 4:14 p.m. ET

Frontier’s Q4 results

Frontier Communications (FTR) marginally beat revenue estimates and reported wider-than-expected losses per share in the fourth quarter of 2018. The company released its results on February 26 after the market bell. Nevertheless, the company’s losses of $0.06 per share improved significantly from a $0.59 loss per share in the year-ago quarter, which raised investors’ confidence in the stock. Frontier stock surged ~18% on February 27 and closed at $2.96 per share.

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The revenues declined 4.2% year-over-year in the quarter due to a decline in subsidy and other regulatory revenues. The company’s broadband and video customer losses also continued in the fourth quarter and were higher than the losses in the year-ago period and the preceding quarter. Also, the company is struggling with a huge debt load and has stopped paying dividends to its shareholders. The company, through its transformation program, is trying to cut down on costs, and it is expected to realize the benefit through 2019 and 2020.

Analysts’ recommendations 

It seems that the company is under pressure to reduce its debt levels and is struggling to retain its video customers. As a result, out of the 14 analysts covering Frontier, seven analysts have given the stock a “sell” rating, while five analysts gave the stock with a “hold” rating. Frontier, however, did not get any “buy” ratings. Analysts have set a target price of $2.98 for the stock with a median consensus estimate of $3.00. Frontier is now trading at a 1.3% discount to its consensus median target estimate.

After the Q4 results, UBS, as well as Cowen and Company, have reduced their price targets on the stock. UBS has slashed the price target from $3 to $2.5, while Cowen has cut the price target to $3 from $6 on the stock.

Market capitalization

Frontier has a market capitalization of $312.4 million as of February 27. Peers Verizon (VZ), AT&T (T), T-Mobile (TMUS), and Sprint (S) have a market capitalization of $234.4 billion, $226.2 billion, $61.3 billion, and $25.9 billion, respectively.

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