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What’s in Store for Cincinnati Bell (CBB) in Q4 Earnings?

Zacks

Telecom service provider Cincinnati Bell CBB is slated to report fourth-quarter 2017 results on Feb 15, before the market opens.

The Zacks Consensus Estimate for revenues is pegged at $466.53 million, reflecting year-over-year improvement of 63.5%. The Zacks Consensus Estimate is pegged at break-even earnings in the to-be-reported quarter.

Meanwhile, the company has a mixed earnings surprise history. Earnings lagged the Zacks Consensus Estimate in two of the previous four quarters and surpassed the same in the remaining two quarters, with an average beat of 61.46%

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


Factors Likely to Influence Q4 Earnings

We appreciate Cincinnati Bell’s efforts to transform itself from a legacy copper-based telecommunications company to an IT company with contemporary fiber assets, offering flexible data, video, voice and IP solutions to both consumer and business customers.

In the Entertainment and Communications business, the company’s investments in Fioptics products helped it to witness revenue growth and subscriber addition in third-quarter 2017. In this regard, the introduction of MyTV through its Fioptics high-speed Internet service bodes well. Additionally, increased investments in strategic products, the creation of a new business division for small and mid-sized businesses as well as the development of its IT Services and Hardware division have raked in more profits. We expect to see a similar uptrend in the Fioptics Internet and video segment in the to-be-reported quarter.

Its eero’s WiFi products should expand FTTH customer base. We appreciate the company’s decision to expand its call center base by hiring more workers. Buyout of OnX Enterprise Solutions will expand Cincinnati Bell’s network and enterprise IT services.

However, in the past three months, the company’s shares have declined 20.4% compared with the industry’s decline of 0.9%.

Cincinnati Bell continues to experience erosion in high-margin local access lines. Expansion and maintenance of its networks require significant capital expenditures. Intense competition in the company’s operational region can be a drag on the company’s pricing power, thereby putting pressure on its margins.

Estimated Subscriber Statistics

The Zacks Consensus Estimate for Cincinnati Bell’s residential voice lines is 0.184 million for fourth-quarter 2017. The figure shows a decline from 0.188 million and 0.201 million in third-quarter 2017 and fourth-quarter 2016, respectively.

Business voice lines estimates of 0.324 million are in line with the company’s reported figures in the previous quarter.

Local access lines estimates of 0.507 million are lower than 0.512 million and 0.524 million in third-quarter 2017 and fourth-quarter 2016, respectively.

Long-distance lines estimates of 0.262 million are pegged lower than 0.299 million and 0.317 million in third-quarter 2017 and fourth-quarter 2016, respectively.

DSL internet subscribers are estimated to be 0.080 million, lower than 0.087 million and 0.106 million in third-quarter 2017 and fourth-quarter 2016, respectively.

Fioptics internet customers estimates of 0.229 million are above 0.221 million and 0.198 million in third-quarter 2017 and fourth-quarter 2016, respectively.

Fioptics video subscribers estimates of 0.146 million are higher than 0.144 million and 0.138 million in third-quarter 2017 and fourth-quarter 2016, respectively. The company’s Fioptics related businesses show a positive trend.

Earnings Whispers

Our proven model does not conclusively show that Cincinnati Bell is 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: Cincinnati Bell has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at breakeven. You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.

Zacks Rank: Cincinnati Bell 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 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Key Picks

Here are some companies from the broader Utilities sector that have the right combination of elements to post an earnings beat this quarter.

Consolidated Edison ED will report its fourth-quarter 2017 earnings on Feb 15. It has an Earnings ESP of +0.64% and carries a Zacks Rank #3. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters with an average beat of 0.06%.

CenterPoint Energy CNP will report its fourth-quarter 2017 earnings on Feb 22. It has an Earnings ESP of +7.62% and holds a Zacks Rank #3. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters with an average beat of 6.42%.

Edison International EIX will report its fourth-quarter 2017 earnings on Feb 22, It has an Earnings ESP of +1.44% and has a Zacks Rank #3. The company’s earnings surpassed the Zacks Consensus Estimate in all the previous four quarters with an average beat of 9.08%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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