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Altice (ATUS) Q2 Earnings Beat Estimates, Revenues Up Y/Y

Zacks Equity Research

Altice USA, Inc. ATUS reported healthy second-quarter 2019 financial results with improved subscriber trends and EBITDA growth. Both the top line and the bottom line increased year over year. The company continues to benefit from its investments to improve customer experience and deliver advanced connectivity services, business solutions and high-quality content.

Net Income

Net income for the June quarter was $86.4 million or 13 cents per share against net loss of $97.9 million or loss of 13 cents per share in the year-ago quarter. The significant improvement was primarily driven by top-line growth. Adjusted earnings came in at 13 cents per share, which beat the Zacks Consensus Estimate by 5 cents.

Altice USA, Inc. Price, Consensus and EPS Surprise

Altice USA, Inc. Price, Consensus and EPS Surprise

Altice USA, Inc. price-consensus-eps-surprise-chart | Altice USA, Inc. Quote

Revenues

Total revenues increased 3.7% year over year to $2,451.1 million driven by growth across residential, business services and advertising operations. The top line, however, lagged the consensus estimate of $2,453 million.

Other Details

Residential revenues were $1,974.9 million, up 3.4% year over year with significant improvement in customer trends and net additions in broadband business. Average revenue per user increased 2.9% year over year to $144.27.

Business services revenues were $357.8 million, up 6.1% with strength in Enterprise & Carrier segment, and SMB. Altice is making progress with new initiatives including Business Hosted Voice for SMB customers and security/DDOS protection for mid-market enterprise customers. The SMB customer base grew due to improved value proposition with voice and data bundles, and reduced churn.

Advertising revenues totaled $113 million, up 2.8% supported by the growth of Altice USA’s advanced advertising platform a4.

Quarterly operating income improved considerably to $482.5 million from $335.1 million in the year-ago quarter, mainly due to higher revenues, and lower depreciation and amortization charges. Adjusted EBITDA was $1,079.2 million compared with $1,005.5 million a year ago.

Cash Flow & Liquidity

Operating free cash flow for the reported quarter was down 0.3% to $762 million, reflecting increased investment in FTTH, new home build, DOCSIS 3.1 and mobile. Free cash flow decreased 3.2% year over year in the second quarter to $472 million, mainly due to higher investment in key growth initiatives. As of Jun 30, 2019, the company’s consolidated net debt was $22,339 million.

Altice repurchased $600 million worth of shares during the quarter under its share repurchase plan and targets to repurchase $1.5 billion worth of shares (excluding any potential merger, asset sale and acquisition activity) in 2019.

2019 Outlook Raised

Altice has raised its outlook for full-year 2019. It currently anticipates revenue growth of 3-3.5% year over year (up from prior guidance of 2.5-3%). However, the company reiterated its plan to expand adjusted EBITDA and cash flow margins, while maintaining the year-end leverage target at 4.5x to 5x net debt/adjusted EBITDA.

Zacks Rank & Stocks to Consider

Altice currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader industry are Harmonic Inc. HLIT, Comtech Telecommunications Corp. CMTL and Nokia Corp. NOK. While Harmonic and Comtech sport a Zacks Rank #1 (Strong Buy), Nokia carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Harmonic surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 119.9%.

Comtech surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 216.7%.

Nokia surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 89.3%.

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