Update (2:30 p.m.): Updated with Windstream information.
Last week, the FCC approved the telephone company's proposed acquisition of AT&T's (T) local wireline, broadband and video operations in Connecticut. Frontier also has Justice Department approval and is awaiting approval from the Connecticut Public Utilities Regulatory Authority. The company expects to close the acquisition in the fourth quarter pending PURA approval.
The stock also received a boost from Windstream's (WIN) announcement that it would spin off its assets into a publicly traded REIT to gain the benefit of tax savings. The news has led the telecommunications sector higher on Tuesday, as investors speculate peer companies could follow suit.
The stock was up 15.74% to $6.88 at 10:12 a.m. More than 51 million shares had changed hands, compared to the average volume of 11,791,700.
Separately, TheStreet Ratings team rates FRONTIER COMMUNICATIONS CORP as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FRONTIER COMMUNICATIONS CORP (FTR) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 44.89% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.40% trails the industry average.
- FTR, with its decline in revenue, slightly underperformed the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Compared to its closing price of one year ago, FTR's share price has jumped by 38.55%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Diversified Telecommunication Services industry average. The net income has decreased by 18.4% when compared to the same quarter one year ago, dropping from $48.14 million to $39.27 million.
- You can view the full analysis from the report here: FTR Ratings Report