Why Frontier Communications (FTR) Stock Is Soaring Today

NEW YORK (TheStreet) -- Frontier Communications (FTR) said Tuesday it will acquire AT&T's (T) wireline residential and business services business in Connecticut for $2 billion in cash.

As part of the agreement, Frontier Communications will gain access to AT&T's fiber network in Connecticut that provides phone, broadband and video to customers across the state. The regional telecommunications company will also gain customers from AT&T including AT&T U-Verse video and satellite TV customers.

The operation that Frontier Communications will acquire represented less than 1% of AT&T's revenue for 2013. AT&T told Reuters that it plans to continue operating and upgrading its wireline networks in the 21 states where it still has the networks.

Shares of Frontier Communications were rising 8.2% to $4.76 on Tuesday. 

TheStreet Ratings team rates FRONTIER COMMUNICATIONS CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about its 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. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 44.90% 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 2.98% trails the industry average.
  • FRONTIER COMMUNICATIONS CORP's earnings per share declined by 42.9% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP's EPS of $0.14 remained unchanged from the prior years' EPS of $0.14. This year, the market expects an improvement in earnings ($0.23 versus $0.14).
  • 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 on the basis of return on equity, FRONTIER COMMUNICATIONS CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Telecommunication Services industry. The net income has significantly decreased by 47.2% when compared to the same quarter one year ago, falling from $67.00 million to $35.40 million.
  • You can view the full analysis from the report here: FTR Ratings Report

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