Why Is Altice USA, Inc. (ATUS) Down 7.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Altice USA, Inc. (ATUS). Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Altice USA, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Altice Misses Q3 Earnings Estimates on Lower Revenues
Altice reported soft third-quarter 2022 results, wherein the bottom line and top line missed the respective Zacks Consensus Estimate and declined year over year due to the challenging macroeconomic environment. Nevertheless, the company has been accelerating the pace of network rollouts and expects to enhance customer connection with its rebranding campaign, thereby reporting improved performances in the long run.
Net Income
Net income in the quarter declined to $85 million or 19 cents per share from $266.9 million or 58 cents per share in the prior-year quarter, primarily due to top-line contraction. The bottom line missed the Zacks Consensus Estimate by 15 cents.
Revenues
Quarterly total revenues slipped to $2,393.6 million from $2,574.9 million in the prior year, owing to lower contributions from residential and advertising businesses due to macroeconomic uncertainty. The top line missed the consensus estimate of $2,455 million.
The company made progress in its growth strategies by accelerating network enhancement and customer experience. It plans to bring 100% fiber broadband to more than two-thirds of its footprint over the next four years to reach a total of 6.5 million FTTH (Fiber to the home) passings by the end of 2025. At quarter-end, Altice had 1.9 million FTTH passings, about 321,000 of which were added in the quarter. Broadband-only customer usage averaged 576 GB per month. FTTH broadband net additions were more than 31,000 in the quarter, led by increased migrations of existing customers and higher fiber gross additions. Total fiber broadband customers reached 135,000 by the end of the quarter. Residential revenue per customer relationship declined 1.9% year over year to $138.12 due to the loss of higher ARPU video customers.
Residential revenues (which include Broadband, Video and Telephony) were $1,880.9 million, down 4.4% year over year due to a loss in customers of 50,000 residential customer relationships and a broadband net loss of 43,000. Business services and wholesale revenues declined to $366.6 million from $440.8 million. News and Advertising revenues were $120.5 million, down 16.1% due to lower contributions from both political and non-political campaigns.
Other Quarterly Details
Operating income declined to $467.3 million from $690.6 million in the year-ago quarter. Adjusted EBITDA was $954.4 million compared with $1,164.8 million in the prior-year quarter. Altice rebranded its national mobile service dubbed Altice Mobile to Optimum Mobile as part of its effort to align all the services under a single national Optimum brand. The rechristened Optimum Mobile witnessed healthy subscriber growth during the quarter, reaching 236,000 customers, representing 5.5% penetration of the residential customer base.
Cash Flow & Liquidity
Altice generated $629.2 million of cash from operating activities in the quarter compared with $698.3 million in the prior year, bringing the tallies for the first nine months of 2022 and 2021 to $1,905.7 million and $2,177.5 million, respectively. Free cash flow was $135.6 million, down 65.2% year over year. As of Sep 30, 2022, the company’s cash and cash equivalents totaled $250.8 million, with net debt of $24,405 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -15% due to these changes.
VGM Scores
Currently, Altice USA, Inc. has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Altice USA, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Altice USA, Inc. belongs to the Zacks Communication - Components industry. Another stock from the same industry, Corning (GLW), has gained 7.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Corning reported revenues of $3.67 billion in the last reported quarter, representing a year-over-year change of +0.7%. EPS of $0.51 for the same period compares with $0.56 a year ago.
Corning is expected to post earnings of $0.44 per share for the current quarter, representing a year-over-year change of -18.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Corning has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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