WINDSTREAM HLDGS. NDQ-WIN
TIMELINESS
SAFETY
TECHNICAL
–H
4
–
High:
Low:
Suspended 12/19/14
RECENT
PRICE
86.6
66.8
93.8
74.3
NMF RELATIVE
DIV’D
Median: NMF) P/E RATIO NMF YLD 9.4%
6.36 P/ERATIONMF(Trailing:
84.3
38.2
69.9
37.7
86.4
36.1
84.2
64.5
75.3
47.2
60.0
45.0
79.8
43.1
LEGENDS
0.5 x ″Cash Flow″ p sh
Suspended 12/19/14 . . . . Relative Price Strength
1-for-6 Rev split 4/15
BETA NMF (1.00 = Market)
Options: Yes
Shaded area indicates recession
53.9
4.4
VALUE
LINE
Target Price Range
2018 2019 2020
Lowered 6/19/15
I
64
48
40
32
24
20
16
12
2018-20 PROJECTIONS
Ann’l Total
Price
Gain
Return
High
9 (+40%) 16%
Low
5
(-20%)
4%
Insider Decisions
to Buy
Options
to Sell
J
0
0
0
F
0
0
0
M
0
0
0
A
0
0
0
M
1
0
0
J
3
0
0
J
0
0
0
A
2
0
1
1-for-6
Reverse
S
0
0
0
8
6
% TOT. RETURN 11/15
Institutional Decisions
1Q2015
228
to Buy
to Sell
209
Hld’s(000) 72621
2Q2015
128
333
68842
3Q2015
90
157
62916
Percent
shares
traded
60
40
20
1 yr.
3 yr.
5 yr.
Windstream traces its roots to Allied Tele- 2005 2006 2007 2008D 2009E 2010G 2011F 2012 2013 2014 2015I 2016
phone Co. of Little Rock, Arkansas formed
- - 38.16 43.04 43.30 41.15
44.16 43.85 62.79
60.25 58.65 57.80 56.60
in 1943. In 1983, Allied merged with Mid- - 11.32 12.85 12.69 11.98
11.95 12.37 16.11
15.86 13.55 11.50 11.00
Continent Telephone Co. of Ohio, creating
-6.18
5.88
5.88
4.56
3.96
4.08
2.88
2.28
d.08 d1.70 d2.10
ALLTEL Corp. ALLTEL acquired Standard
-1.22
6.00
6.00
6.00
6.00
6.00
6.00
6.00
6.00
3.30
.60
Group, Inc. and Aliant Communications in
-4.70
4.83
4.33
4.09
4.94
7.18 11.23
8.46
7.91
7.25
7.75
1999. It also purchased phone lines from
-5.91
9.24
3.44
3.58
9.88 15.33 11.27
8.45
2.26
2.75
3.00
GTE, Verizon and others. On 7/17/06, in a
- - 79.48 75.77 73.25 72.81
84.07 97.74 98.05
99.39 99.39 100.00 100.00
$9.1 billion equity and debt deal, ALLTEL
-13.0
14.5
11.5
11.7
17.6
18.4
21.6
22.3
NMF Bold figures are
Value Line
spun off its wireline assets, which merged
-.70
.77
.69
.78
1.12
1.15
1.38
1.25
NMF
estimates
with VALOR Communications to form Wind-1.5%
7.0%
8.9% 11.2%
8.6%
8.0% 9.7% 11.8% 10.5%
stream. Since then, the company has grown 2923.5 3033.3 3260.8 3171.5 2996.6 3712.0 4285.7 6156.3 5988.1 5829.5 5780 5600
via several multi-million dollar acquisitions.
381.7 450.5 465.8 434.9 334.5
310.7 361.4 281.9
235.0
d.08 d170
d210
CAPITAL STRUCTURE as of 9/30/15
Total Debt $5699.3 mill. Due in 5 Yrs $2900.0 mill.
LT Debt $5693.4 mill. LT Interest $275.0 mill.
(Interest not earned.)
Leases, Uncapitalized Annual rentals $120.4 mill.
Pension Assets-12/14 $1042.0 mill.
Oblig. $1331.8 mill.
Pfd Stock None
Common Stock 101,000,000 shs.
Adjusted for 1-for-6 reverse stock split eff. 4/26/15
MARKET CAP: $650 million (Small Cap)
CURRENT POSITION 2013
2014 9/30/15
($MILL.)
Cash Assets
57.9
34.5
97.2
Other
1126.9
969.2 1025.8
Current Assets
1184.8 1003.7 1123.0
Accts Payable
385.9
403.3
366.7
Debt Due
85.0
717.5
5.9
Other
974.7
922.2
925.1
Current Liab.
1445.6 2043.0 1297.7
Fix. Chg. Cov.
167% 102%
120%
ANNUAL RATES Past
Past Est’d ’12-’14
of change (per sh)
10 Yrs.
5 Yrs.
to ’18-’20
Revenues
-7.5%
2.0%
‘‘Cash Flow’’
-4.0%
5.0%
Earnings
- - -22.0%
NMF
Dividends
--NMF
Book Value
-6.0% 13.0%
QUARTERLY REVENUES ($ mill.)
Mar.31 Jun.30 Sep.30 Dec.31
2012 1538 1534 1545 1538
2013 1496 1501 1498 1491
2014 1465 1466 1456 1442
2015 1419 1421 1499 1441
2016 1410 1400 1400 1390
EARNINGS PER SHARE A
Calendar Mar.31 Jun.30 Sep.30 Dec.31
2012
.13
.12
.12
.11
2013
.09
.06
.05
.20
2014
.02
.02
.01
d.13
2015
.05 d1.13
d.08 d.54
2016
d.50 d.50 d.55 d.55
QUARTERLY DIVIDENDS PAID B ■
Calendar Mar.31 Jun.30 Sep.30 Dec.31
2011 1.50
1.50
1.50
1.50
2012 1.50
1.50
1.50
1.50
2013 1.50
1.50
1.50
1.50
2014 1.50
1.50
1.50
1.50
2015 1.50
1.50
.15
.15
Calendar
Full
Year
6156.3
5988.1
5829.5
5780
5600
Full
Year
2.88
2.28
d.08
d1.70
d2.10
(A) Dil, EPS. Excl. net nonrecurring
gains/(loss): ’06, $1.32; ’07, $5.76; ’08, (30¢);
’11, ($2.10); ’12 (12¢). Next egs. report early
Feb. (B) Dividends paid in mid-January, April,
Full
Year
6.00
6.00
6.00
6.00
41.2% 38.3% 35.1% 39.4% 38.7%
13.1% 14.9% 14.3% 13.7% 11.2%
6.4% 92.1% 88.4% 95.5% 96.0%
93.6%
7.9% 11.6%
4.5%
4.0%
3727.9 5926.0 6031.0 5610.5 6532.1
2963.6 3939.8 4042.3 3897.1 3992.6
10.5%
9.4% 11.4% 11.4%
8.2%
10.9% 95.9% 66.6% 172.4% 128.3%
10.9% 95.9% 66.6% 172.4% 128.3%
10.9% 74.1%
NMF
NMF
NMF
-23% 102% 102%
NMF
38.5% 36.9% 34.3%
8.4%
8.4% 4.6%
89.6% 85.6% 88.0%
10.4% 14.4% 12.0%
8017.2 10435 9219.7
4772.7 5708.1 5862.7
7.1%
6.1% 6.3%
37.4% 24.1% 25.5%
37.4% 24.1% 25.5%
NMF
NMF NMF
NMF
NMF NMF
30.9%
NMF NMF
3.9%
NMF NMF
91.1% 97.2% 95.0%
8.9%
2.8% 5.0%
9462.4 8159.0 5500
5702.6 5412.3 4500
5.7%
NMF NMF
28.0%
NMF NMF
28.0%
NMF NMF
NMF
NMF NMF
NMF
NMF NMF
NMF
NMF
90.0%
6.0%
5600
4750
NMF
NMF
NMF
NMF
NMF
THIS
STOCK
VL ARITH.*
INDEX
-88.4
-82.4
-86.6
-2.0
48.1
71.2
© VALUE LINE PUB. LLC
18-20
Revenues per sh
‘‘Cash Flow’’ per sh
Earnings per sh A
Div’ds Decl’d per sh B ■
Cap’l Spending per sh
Book Value per sh
Common Shs Outst’g C
Avg Ann’l P/E Ratio
Relative P/E Ratio
Avg Ann’l Div’d Yield
58.00
14.00
.60
.60
8.50
4.50
100.00
12.0
.75
8.3%
Revenues ($mill)
Net Profit ($mill)
Income Tax Rate
Net Profit Margin
Long-Term Debt Ratio
Common Equity Ratio
Total Capital ($mill)
Net Plant ($mill)
Return on Total Cap’l
Return on Shr. Equity
Return on Com Equity
Retained to Com Eq
All Div’ds to Net Prof
5800
60.0
25.0%
1.0%
85.0%
8.0%
6000
5000
1.0%
2.0%
2.0%
2.0%
100%
BUSINESS: Windstream Holdings is one of the largest rural
wireline telecom companies in the U.S. Provides local telephone
service to over three million customers across 29 states. Also operates long distance phone, Internet, product distribution, and communication technology solutions. Sold publishing business 11/07,
wireless operations 12/08. Local and long-haul fiber network:
115,000 miles. Access lines: 3.5 mill. Has 1.35 mill. broadband and
426,100 digital-TV accounts. Off. & dir. own less than 1% of com;
Vanguard Group, Inc., 7.8% (3/15 proxy). 2014 deprec. rate: 9.0%.
Has 12,626 empls. Chrmn: Jeffrey T. Hinson. Pres. & CEO: Tony
Thomas. Inc.: DE. Addr.: 4001 Rodney Parham Rd., Little Rock, AR
72212. Tel.: 501-748-7000. Internet: www.windstream.com.
Windstream is divesting its data center assets. The network communications
company struck a deal with TierPoint, a
national provider of cloud services, to sell
its data center business in an all-cash
transaction for $575 million. As part of the
agreement, Windstream will establish an
ongoing strategic partnership with TierPoint, allowing both companies to sell
their respective products and services to
each other’s customers. Consequently, proceeds from the deal will likely be allocated
toward further debt reduction as management continues to seek ways to delever the
balance sheet. The data centers generated
about $30 million in revenue and $10 million in adjusted EBITDA in the second
quarter, though as per Value Line policy,
we will not update our estimates until the
deal is finalized. To that end, the boards of
both entities have approved the transaction, which is expected to close in the first
quarter of 2016, pending certain regulatory approvals.
Meantime,
Windstream’s
thirdquarter results came in ahead of expectations. WIN reported a bottom-line
loss of $0.08 a share, which beat our es-
timate for a deficit of $0.70 a share. The
better-than-expected outcome was due to
enterprise revenue outperformance, attributable to modest price increases and an
uptick in demand for certain services. Accordingly, we have adjusted our 2015 estimates upward to reflect these positive
events, though we still anticipate a share
loss of $1.70 for the full year.
While the company’s efforts to improve its financial profile are a step in
the right direction, we remain concerned about the highly leveraged
balance sheet. Windstream has nearly
$5.7 billion in long-term debt on its books,
and while we expect proceeds from the
agreed-upon sale of data center assets to
be earmarked for debt reduction, we believe more will have to be done to augment
WIN’s long-term solvency. Moreover, higher capital spending in the near term will
likely pressure cash flow next year, so we
look for more divestures in 2016 as management seeks new ways to delever.
The Timeliness rank on these shares
remains suspended due to the spinoff
and reverse stock split.
Daniel Henigson
December 18, 2015
July and October. ■ Dividend reinvestment plan
available. ’15 Q3 dividend prorated following
REIT spinoff. (C) In millions, adj. for split. (D)
Includes CT Comm. (E) Excludes former CT
Comm. wireless ops. (F) Includes D&E Comm.
and Lexcom (G) Incl. NuVox and Iowa Telecom
beginning 6/1/10. (H) Rank susp. due to REIT
spinoff. (I) Denotes spinoff of CS&L 4/26/15.
© 2015 Value Line, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
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Company’s Financial Strength
Stock’s Price Stability
Price Growth Persistence
Earnings Predictability
C+
NMF
NMF
NMF
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