Frontier Communications (FTR) Stock Rallying After Accepting $283M to Expand Broadband Service

NEW YORK (TheStreet) -- Shares of Frontier Communications (FTR) are rallying by 2.66% to $5.01 on Tuesday after the company said today that it accepted more than $283 million in annual Connect America Funding (CAF) from the Federal Communications Commissions to expand broadband service to 650,000 unserved locations in its 28-state service area.

"CAF Phase II is a critical next step in delivering broadband service - and the major economic benefits associated with it - to rural America," President and CEO Dan McCarthy said. 

The communications company accepted the funding more than two months before the formal August 27 deadline because it is "eager to start building the infrastructure necessary to provide service to these markets as soon as possible," McCarthy added.

In 2011, the FCC established the CAF to facilitate broadband deployment to millions of Americans living in rural areas without access to broadband infrastructure.

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 revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

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

  • The revenue growth came in higher than the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 18.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 40.92% 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, FTR's net profit margin of -3.71% significantly underperformed when compared to the industry average.
  • FRONTIER COMMUNICATIONS CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past two years indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than the prior full year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP increased its bottom line by earning $0.13 versus $0.12 in the prior year. For the next year, the market is expecting a contraction of 23.1% in earnings ($0.10 versus $0.13).
  • Net operating cash flow has decreased to $249.00 million or 20.41% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The share price of FRONTIER COMMUNICATIONS CORP has not done very well: it is down 8.91% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • You can view the full analysis from the report here: FTR Ratings Report

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