Frontier Communications: Another Debacle?

It seems like the downtrend in Frontier Communications (NASDAQ: FTR) stock is far from over. The company posted its Q3 results last week. Its EPS of ($0.94) for the period beat the street’s estimates and its revenues of $2.25 billion were largely in-line with the analyst consensus, yet its stock has collapsed by over 30% since then owing to a weak guidance. Should you seize this opportunity and buy into Frontier Communications? Maybe not. Even though its shares have been creating new lows amidst an environment of extreme bearishness, I don’t think this is the right time to initiate a long-side contrarian position in the company. Let’s take a closer look.

Pricing Issue?

Let me start by saying that Frontier posted an overall customer churn of 2.08% for the quarter, which turned out to be quite close to my own forecast of 2.06% for the period - derived in my last article on the company. But it’s not the only metric that determines the revenue and profitability figures of a telecom company. In spite of a healthy churn rate improvement, Frontier ended up with a yet another EBITDA guidance miss.

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