It has been a month since the last earnings report for Cincinnati Bell (CBB). The shares gained around 0.1% during this period, lagging the S&P 500.
Will the recent positive trend last until the next earnings release, or is Cincinnati Bell about to retreat? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the latest earnings report to get a better grip on the key drivers.
Cincinnati Bell Reports Tighter Q3 Loss, Revenues Up YoY
Cincinnati Bell reported decent results for the third quarter of 2020, with return on sales improving year over year. In addition, the company’s results exceeded estimates with a loss that was less than expected.
On a GAAP basis, net loss for the September quarter was $ 10.8 million, or a loss of 21 cents per share, compared to a net loss of $ 16.2 million, or a loss of 32 cents per share, for the year-ago quarter. This improvement over the previous year was mainly due to higher sales in the quarter under review.
Non-GAAP net loss was $ 8 million, or a loss of 16 cents per share, compared to a net loss of $ 15.4 million, or a loss of 31 cents per share, for the year-ago quarter. The end result was tighter than the Zacks consensus estimate of a loss of 25 cents.
Quarterly revenue rose 1.8% year over year to $ 389.5 million, mainly driven by solid development in the IT services and hardware segment, as well as robust demand for fiber optics despite macroeconomic issues due to the coronavirus pandemic .
Income from Entertainment and communication declined 3% year over year to $ 241 million, with Cincinnati adding $ 166.8 million and Hawaii adding $ 74.2 million to the total. Customer churn from linear video programming with lower margins to over-the-top solutions and weak legacy sales detracted from sales in both markets. Adjusted EBITDA was $ 88.8 million, down 4.3 percent from the year-ago quarter.
IT services and hardware Revenue was $ 155.2 million compared to $ 140.5 million for the prior year quarter. Adjusted EBITDA was $ 15.6 million for the third quarter, an increase of 26.8% year over year.
The story goes on
Total operating income was $ 24.7 million compared to $ 22.8 million for the year-ago quarter due to lower operating expenses. Adjusted EBITDA decreased 0.1 percent to $ 101.7 million.
Cash flow & liquidity
Cincinnati Bell generated cash flow from operating activities of $ 138.9 million for the first nine months of 2020, compared to $ 188.9 million for the same period last year. As of September 30, 2020, the regional telephone company’s non-GAAP net debt was $ 1,949.2 million with cash and cash equivalents of $ 8.8 million.
Despite the crisis caused by COVID-19, Cincinnati Bell is focused on evolving from a copper-based telecommunications company to a technology company with advanced fiber optic facilities that serves both consumer and business customers with flexible data, video, voice and IP solutions . Armed with a well-designed marketing program, popular brand equity, and reputation for quality service, the company expects its entertainment and communications revenue to grow. The expansion of the geographic presence in IT services led to improved scaling and diversification of customers and supported the switch to a provider of hybrid IT solutions.
How have the estimates moved since then?
Analysts have been calm for the past two months as none of them issued a revision of earnings estimates.
Currently, Cincinnati Bell has a good growth factor of B, although it lags far behind with an F on the momentum score. However, the stock was assigned a grade of A on the value side, which puts it in the top quintile investment strategy.
Overall, the stock has an aggregated VGM value of B. Unless your focus is on one strategy, that value is the one you should be interested in.
Cincinnati Bell has a Zacks Rank 3 (Hold). We expect the stock to generate inline returns over the next several months.
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