It has been a month since the last earnings report for Cincinnati Bell (CBB). The shares gained around 0.9% during this period, outperforming the S&P 500.
Will the recent positive trend continue until the next earnings release, or is Cincinnati Bell about to pull out? 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 catalysts.
Cincinnati Bell proposes Q4 estimates for higher revenue
Cincinnati Bell reported relatively healthy results for the fourth quarter of 2020, with the bottom line beating sales growth estimates.
On a GAAP basis, net loss for the December quarter was $ 8.2 million, or a loss of 16 cents per share, compared to a net loss of $ 23.2 million, or a loss of 46 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 $ 6.9 million, or a loss of 14 cents per share, compared to a net loss of $ 10.9 million, or a loss of 22 cents per share, for the year-ago quarter. The end result was closer than the Zacks consensus estimate of a loss of 15 cents.
For 2020, the company recorded a net loss of $ 66 million, or a loss of $ 1.30 per share, compared to a net loss of $ 77 million, or a loss of $ 1.50 per share, in 2019. Excluding one-time items, the GAAP net loss in 2020 $ 18.4 million or less loss of 36 cents per share compared to a net loss of $ 57 million or a loss of $ 1.13 per share in 2019.
Quarterly revenue rose 5.1% year over year to $ 410.3 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 . For 2020, revenue improved from $ 1,536.7 million in 2019 to $ 1,559.8 million.
Income from Entertainment and communication declined slightly from $ 246.4 million in the year-ago quarter to $ 245.1 million, with Cincinnati adding $ 170.6 million and Hawaii adding $ 74.5 million to the total. Customer churn from linear video programming with lower margins to over-the-top solutions and weak legacy sales slowed sales in both markets. Adjusted EBITDA was $ 92.6 million compared to $ 89.6 million in the prior year quarter.
IT services and hardware Revenue was $ 172.1 million compared to $ 150.4 million for the prior year quarter. Adjusted EBITDA was $ 23.5 million for the fourth quarter, an increase of 26.3% year over year.
The story goes on
GAAP operating income was $ 33.8 million from $ 15.3 million for the year-ago quarter due to higher sales. Adjusted EBITDA was $ 110.4 million from $ 102.6 million in the prior year quarter.
Cash flow & liquidity
Cincinnati Bell generated cash flow from operating activities of $ 206.1 million in 2020, compared to $ 259.1 million for the same period last year. As of December 31, 2020, the regional telephone company’s non-GAAP net debt was $ 1,959.5 million with cash and cash equivalents of $ 12.2 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.
At this point, Cincinnati Bell has an excellent growth factor of A, although it lags far behind with a D on the momentum score. However, the stock was given an A rating on the value side, which makes it fall into the top quintile for this investment strategy.
Overall, the stock has an aggregated VGM value of A. 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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