On Friday, Citi reaffirmed its Buy rating on shares of Frontier Communications (OTC:FTRCQ) (NASDAQ: FYBR), maintaining a $32.00 price target after the telecommunications company reported second-quarter results that surpassed both Citi's projections and the wider market consensus.
Frontier's revenue saw a 2.1% increase, while EBITDA rose by 5.1% to $560 million. Notably, the company added 92,000 net new fiber customers, a figure that significantly exceeded expectations.
The financial outperformance was attributed primarily to business revenue, which benefited from stronger fiber and copper contributions. In the consumer segment, financial performance remained robust.
However, the high volume of new fiber customers may have tempered the expected rise in fiber average revenue per user (ARPU) to $65, slightly below the anticipated $66. Frontier's base fiber penetration surpassed its medium-term target, reaching 45.3%.
Frontier Communications also confirmed it is on track to meet its construction targets and capital expenditure plans for the fiscal year 2024. Moreover, the company adjusted its EBITDA guidance for 2024, increasing the mid-point of the forecast by approximately 45 basis points by raising the lower end of the range.
It reported Q2 2024 revenues of $1.48 billion, surpassing consensus estimates. The telecom company also saw a surge in Consumer fiber subscribers, adding 90,000 new customers during the quarter, exceeding market forecasts.
Frontier has raised the lower end of its 2024 guidance from $2.20 billion to a range of $2.22 to $2.25 billion. Analysts from UBS and Goldman Sachs initiated coverage on Frontier Communications, expressing optimism about the company's transition towards a growing fiber provider, setting price targets of $33.00 and $29.00 respectively. However, TD Cowen revised its outlook on Frontier, reducing the stock's price target to $39 from $41, while maintaining a Buy rating.
InvestingPro Insights
In light of Citi's reaffirmation of a Buy rating on Frontier Communications (NASDAQ:FYBR), a closer look at the company's financial health and market performance through InvestingPro's lens may offer additional insights. With a significant market capitalization of $6.66 billion, Frontier operates with a hefty price-to-earnings (P/E) ratio of 245.73, which adjusts to a still high 79.04 when considering the last twelve months as of Q1 2024. This indicates that investors are paying a premium for earnings, which aligns with one of the InvestingPro Tips highlighting the company's high earnings multiple.
Revenue for the last twelve months stood at $5.773 billion, with a slight decline of 0.12%, though quarterly revenue growth showed a modest increase of 1.53%. The gross profit margin remains strong at 63.54%, suggesting that Frontier is effective in managing its cost of goods sold relative to its sales. However, the company's EBITDA saw a decline of nearly 7%, which could be a point of concern for potential investors.
Frontier's stock has shown strong returns, with a 59.5% one-year price total return, reflecting investor confidence and market performance that may not be entirely captured by the fundamental metrics alone. The company's share price is currently at 90.13% of its 52-week high, indicating a positive trend in investor sentiment.
InvestingPro Tips also highlight some potential areas of concern, such as the company's significant debt burden and cash burn, which could pose risks to its financial stability. Furthermore, analysts have revised their earnings expectations downwards for the upcoming period, and they do not anticipate the company will be profitable this year.
For readers interested in a deeper dive into Frontier's financials and future prospects, InvestingPro offers a comprehensive set of tips, including 11 additional insights, which can be found at https://www.investing.com/pro/FYBR. These tips could provide valuable context for evaluating the company's investment potential and understanding the broader market implications of its financial data.
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