Intelsat (I) Down 54.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Intelsat (I). Shares have lost about 54.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Intelsat due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Intelsat Q4 Loss Narrower Than Expected, Revenues Fall

Intelsat reported relatively modest fourth-quarter 2019 results with both the top and bottom line exceeding the respective Zacks Consensus Estimate. However, revenues were down year over year as media revenues declined due to the increasing importance of digital platforms content.

Net Loss

On GAAP basis, net loss for the reported quarter was $114.9 million or loss of 81 cents per share compared with loss of $111.3 million or loss of 81 cents per share in the prior-year quarter. The wider net loss was primarily due to lower revenues and higher operating expenses. Net loss per share was, however, narrower than the Zacks Consensus Estimate of loss of 99 cents.

In 2019, Intelsat recorded net loss of $913.6 million or loss of $6.51 per share compared with loss of $599.6 million or loss of $4.63 per share in 2018.

Revenues

Quarterly revenues declined 4.8% to $516.9 million but surpassed the consensus estimate of $499 million. In full-year 2019, total revenues were $2,061.5 million compared with $2,161.2 million in 2018.

By type of service, total on-network revenues in the reported quarter declined 7% to $454.5 million, mainly due to lower transponder services. Total off-network and other revenues increased $7.4 million to $62.4 million, primarily driven by the higher aggregate revenues in Transponder, MSS and other Off-Network services.

By customer application, revenues from network services, media, and government services were $200.2 million (down 1% year over year), $210.6 million (down 9%), and $96 million (down 2%), respectively.

Other Details

Total operating expenses were $321 million compared with $310.4 million in the prior-year quarter due to higher direct costs of revenues and SG&A expenses. Consequently, operating income declined to $195.9 million from $232.4 million in the year-ago quarter. Adjusted EBITDA decreased to $371.3 million or 72% of revenues from $417.9 million or 77% of revenues in the year-ago quarter. The lower adjusted EBITDA majorly reflects increased direct costs of revenues and off-network satellite expenses related to customer restoration services for the loss of Intelsat 29e satellite in April 2019.

Intelsat’s average fill rate on its approximately 1,800 36 MHz station-kept wide-beam transponders was 78% on Dec 31, 2019. At quarter end, contracted backlog was $7 billion compared with $7.2 billion on Sep 30, 2019.

Cash Flow & Liquidity

Intelsat generated $255.5 million of net cash from operating activities in 2019 compared with $344.2 million in 2018. Free cash flow from operations was $38.8 million in 2019. As of Dec 31, 2019, the company had $810.6 million in cash and cash equivalents with $14,465.5 million of long-term debt compared with respective tallies of $485.1 million and $14,028.3 million a year ago.

Outlook

For full-year 2020, Intelsat expects revenues in the range of $1.93-$1.98 billion with adjusted EBITDA between $1.34 billion and $1.39 billion.

Intelsat expects its capital expenditure for 2020, 2021 and 2022 in the range of $200-$250 million, $225-$300 million and $225-$325 million, respectively. It stated that over the next several years, it will be in a cycle of lower required investment, due to timing of replacement satellites and smaller satellites being built.

Intelsat’s 2020 operational priorities are expected to stabilize its core business, improve competitive position, return the company to growth and optimize asset value by leading the industry in seamless implementation of satellite-based telecommunications solutions coupled with global telecommunications infrastructure.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted 13.74% due to these changes.

VGM Scores

Currently, Intelsat has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Intelsat has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.