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What's in Store for Windstream (WIN) this Earnings Season?

Leading local exchange carrier in the U.S., Windstream Holdings Inc. WIN, is slated to report first-quarter 2017 financial numbers before the opening bell on May 4.

Over the past three months, shares of Windstream lost 29.3% compared with the Zacks-categorized Wireless National industry’s decline of 2.4%.

Last quarter, the company delivered a negative earnings surprise of 8.51%. However, the company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, with an average beat of 12.21%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

We appreciate Windstream’s efforts to reward its stockholders with a quarterly dividend. On Apr 17, 2017, Windstream paid out15 cents per share to its stockholders of record as of Mar 31, 2017.

We appreciate Windstream’s focus on improving sales, cutting cost and planning pricing initiatives, which are expected to lead to profits and check churn. Windstream’s cloud-to-cloud disaster recovery management solutions replicate mission-critical virtual servers and data. Launch of Kinetic TV services in 13 North Carolina communities was aimed at boosting broadband revenues and customer ARPU (average revenue per user). The company is striving to reverse the broadband subscriber decline trend experienced last quarter.

Also, expansion of its metro fiber network business in the Atlanta, Minneapolis, Philadelphia, St. Louis, Cleveland, Dallas, Chicago, Little Rock and Detroit areas bodes well. Meanwhile, the merger with EarthLink Holdings Corp is sure to boost Windstream’s SD-WAN (software-defined wide area network) suite. The deal has expanded Windstream’s footprint, taking its total to 145,000 route miles, both in Southeast and Northeast U.S.

On the flip side, Windstream has been losing access lines due to pricing pressure and fierce competition. The company is also under pressure with losses in the wholesale business. Being a local exchange carrier, Windstream remains exposed to stringent regulatory measures by the Federal Communications Commission as well as state regulations.

Further, continued investments in technology and network upgrades may dent the company’s earnings. Outdated network equipment was the main reason for service discontinuation of the DSL (digital subscriber line) service in CLEC (competitive local exchange carrier) territories across 25 states.

Despite management’s efforts to modify its financial profile, we remain concerned about Windstream’s highly leveraged balance sheet.

Earnings Whispers

Our proven model does not conclusively show that Windstreamis likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Windstream has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 34 cents. You can uncover the best stocks to buy or sell before they’re reported with the">Earnings ESP Filter.

Zacks Rank: Windstream has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the Zacks-categorized broader Computer and Technology sector — which houses Windstream— that have the right combination of elements to post an earnings beat this quarter.

Sprint Corp. S has an Earnings ESP of +25.00% and a Zacks Rank #3. The company will release fourth-quarter 2016 results on May 3. You can see _1link">the complete list of today’s Zacks #1 Rank stocks here.

Apptio Inc. APTI has an Earnings ESP of +8.33% and a Zacks Rank #3. The company will release first-quarter 2017 earnings on May 4.

Apple Inc. AAPL has an Earnings ESP of +1.00% and a Zacks Rank #3. The company is expected to release second-quarter fiscal 2017 results on May 2.                                                                   

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