Frontier Communication Shares Rebound Amid Improving Financials

Frontier Communications

Frontier Communication (NASDAQ:FTR) shares were among the most prominent losers last year amid weak financial numbers and tumbling cash position. However, the company’s strategy of improving its consumer business segment and enhancing its cash position through dividend suspension started strengthening trader’s sentiments.

Its stock bounced back sharply to $11 this month after trading in a narrow range of $6 during the first four months. Frontier’s better than expected financial results for the first quarter provided support to its share price.

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Market pundits believe FTR stock has the potential to sustain the recent gains; they are expecting the stock price to trade in a range of $10 to $15 a share in the days to come.

Frontier Communication has beaten revenue and earnings estimates for the first quarter by $10 million and $0.25 per share. Its first-quarter revenue of $2.20 billion increased 6% from the final quarter of fiscal 2017. This growth in revenue was attributed to improving revenue from consumer business and the growth in subscriber rates in Texas, California, and Florida.

Commenting on results its CEO said, “In the first quarter we achieved growth in consumer revenue, reflecting the early results of the substantial initiatives we have underway across the company.”

Cash Position Strengthens

Frontier Communication is under the massive debt burden of $16 billion, and it has to pay significant interest on that debt. The company is likely to spend $1.5 billion in interest expense this year. It has suspended quarterly dividends for investors to lower the debt level, while the management is showing more disciple in its capital allocation strategy.

They have also amended their credit facilities to improve the capital structure flexibility. Frontier has also issued $1.6 billion of Secured Notes due in 2026. The company plans to use the proceeds to repurchase $1.65 billion aggregate principal amount of notes due in 2020 and 2021. During the conference call, the company claimed that they are committed to reducing debt and improving financial leverage profile.

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