Frontier Stock Soars on Improved Results

Shares rise 39% in early trading Wednesday
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Frontier Communications stock soared by more than 39% in early trading Wednesday, a day after it reported improved fourth quarter results.

Frontier reported its Q4 results on Feb, 26, after the market close. Revenue was down 4% to $2.1 billion and cash flow was down 2.6% to $895 million year over year, but up almost 2% sequentially. After 11 straight quarters of poor performance, analysts and the investment community appeared encouraged that the results showed some positive momentum for the troubled telecom company.

Frontier stock, down 65% in 2018, rose as much as 39.4% (99 cents each) to $3.50 per share early on Wednesday. The stock closed at $2.96 per share on Feb. 27, up 45 cents each or 18%.

Net losses improved to $219 million in Q4, a massive change from the $1.2 billion it lost in the prior year. For the full year, Frontier pared its net losses to $750 million from a loss of $2 billion in 2017.

Related: Frontier's Formula

The telco shed 67,000 broadband customers in the quarter, higher than the 63,000 it lost in the prior year but indicative of what the company said is its new “disciplined approach.” Video losses for the period were also up -- to 35,000 from 20,000 in the prior year. Overall, the new approach has had an impact on churn, which was 1.94% in the period an improvement over the 1.98% reported in Q4 2017 and the 2.03% reported in Q3 2018.

“Our view is that focusing on acquiring customers who are less likely to churn will over time result in further churn improvements while reducing the costs associated with adding customers that have higher propensity to churn,” Frontier CEO Daniel McCarthy said on a conference call with analysts to discuss results. “This selectivity is a factor in the stronger fourth quarter EBITDA result and you should expect to see further progress on all of these metrics in coming quarters.”

Frontier said it expects Adjusted EBITDA to be in the $3.45 billion to $3.55 billion in 2019 (in line with 2018), capital expenditures to fall to about $1.15 billion from $1.2 billion in 2017 and operating free cash flow to rise to between $575 million and $675 million. 

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