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Cincinnati Bell (CBB) Lags Q1 Earnings, Keeps 2016 View

Cincinnati Bell Inc. CBB reported weak financial results in the first quarter of 2016 wherein both the top and the bottom line failed to beat the Zacks Consensus Estimate.

On a GAAP basis, quarterly net income came in at $4.4 million or 2 cents per share compared with a net income of $46.6 million or 22 cents in the year-ago quarter. However, adjusted (excluding special items) earnings per share of 1 cent fell short of the Zacks Consensus Estimate of 3 cents.

Quarterly total revenue was $288.9 million, down 1.4% year over year and below the Zacks Consensus Estimate of $293 million.

Operating income was $29.6 million, down 20.2% year over year owing to higher SG&A costs and depreciation and amortization charges. Meanwhile, adjusted EBITDA (earnings before interest, depreciation and amortization) decreased 2% year over year to $77.2 million in the reported quarter. EBITDA margin was 27%, flat on a year-over-year basis.

Cash Flow

In the first quarter of 2016, Cincinnati Bell generated $66 million of cash from operations compared with $6.3 million in the prior-year quarter. Quarterly free cash flow was $7.6 million compared with a negative $35.7 million in the year-ago quarter.

Liquidity

Cincinnati Bell ended the first quarter with cash and cash equivalents of $7.9 million compared with $7.4 million at the end of 2015. Net debt at quarter-end was $1,232.9 million as compared with $1,230.2 million at 2015-end.

Segmental Results

Entertainment and Communications revenues inched up 1.2% year over year to $190.3 million owing to a 10% rise in Consumer revenues. The increase was partially offset by a 17% and 1.1% decline in Business and Carrier revenues, respectively.

IT Services and Hardware revenues decreased 4.7% year over year to $102.5 million. The downside was driven by an 18.7% decline in integration revenues, partially offset by an 18.2% rise in business strategic revenues.

Subscribers Statistics

As of Mar 31, 2016, Cincinnati Bell had 0.2131 million residential local access lines, down 7.5% year over year and 0.3159 million business local access lines, up 2.9% year over year. Long distance lines were 0.334 million, down 6%. DSL Internet subscribers were 0.1279 million, down 14.5%. Fioptics Internet customers were 0.1645 million, up a whopping 33.6%. Fioptics video subscribers were 0.120 million, up 25.3% year over year.

Outlook

Cincinnati Bell reaffirmed its guidance for full-year 2016. The company expects revenues and adjusted EBITDA of approximately $1.2 billion and $303 million (plus or minus 2%), respectively.

Zacks Rank & Stocks to Consider

Cincinnati Bell currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include BCE Inc. BCE, TELUS Corporation TU and Telefonica, S.A. TEF. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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TELEFONICA S.A. (TEF): Free Stock Analysis Report
 
TELUS CORP (TU): Free Stock Analysis Report
 
CINCINNATI BELL (CBB): Free Stock Analysis Report
 
BCE INC (BCE): Free Stock Analysis Report
 
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