Consolidated Communications Stock Forecast: Fiber optics are the future of broadband technology. Connected homes and businesses enjoy significantly higher speed as compared to traditional copper-based solutions like cable and DSL.
These higher speeds make it possible to transfer large amounts of data quickly and seamlessly, which is critical to a high-quality experience with today’s applications. For example, fiber optics has all but eliminated the challenges of streaming video and video conferencing.
The science behind fiber optics is fascinating. This technology relies on light instead of electricity for data transmission. Higher frequencies are used to accomplish data transfer, which means a higher volume of information can be transferred successfully.
Because the cable itself is made from plastic or glass, fiber optic technology doesn’t face the same risk of electromagnetic interference that plagues traditional metal cables. As a result, data can move long distances without degrading.
Laying fiber cable is an expensive endeavor, but the good news is that this technology appears future-proof. Developers are confident that current fiber optic infrastructure will support the improvements in speed that are sure to come over the next few years.
The companies bringing this technology to consumers and businesses are in a good position to deliver value to shareholders over time – particularly if they can continue to expand the fiber optic infrastructure, and they can keep up with consumer demand for access to cutting edge technology.
Consolidated Communications is hard at work on achieving these goals. For investors, the question is what’s Consolidated’s stock forecast?
What Does Consolidated Communications Holdings Do?
Individuals and businesses rely on their infrastructure to connect, engage, and complete a wide variety of tasks. Consolidated Communications [NASDAQ: CNSL] provides that infrastructure to residential and commercial properties, along with the wireless and wireline carriers that serve these communities.
Consolidated Communications operates across 23 states, with services in urban, suburban, and rural areas.
The company’s fiber network includes 37,000 fiber route miles. It gives business customers access to a range of services, including high-speed internet, phone, data, security, cloud services, managed services, and wholesale carrier solutions.
Residential customers rely on Consolidated Communications infrastructure for internet access, television service, phones, and home security.
Consolidated Communications [NASDAQ: CNSL] went public in 2005. Today, it falls within the top 20 business fiber providers.
Competitors include industry leading organizations like AT&T, Verizon, CenturyLink, and Comcast. Will Consolidated Communications be able to keep up with these companies as consumers demand access to more advanced technology?
Consolidated Communications: By the Numbers
The fact is that 2019 did not get off to a good start. During its first quarter earnings call in April, the company’s leaders made some unpopular announcements. First, year over year quarterly revenue was down from $356 million to $338.6 million. Net loss per share improved from $0.07 to $0.03, but it was still a loss.
The biggest shock for investors was the company’s decision to eliminate its dividend. After the call, Consolidated Communications stock prices dropped precipitously – more than 32 percent in a single day. Clearly, investor sentiment was not assuaged by leaderships’ promises that this move would free up capital to aggressively accelerate its fiber investment strategy.
The second quarter earnings call was free of dramatic announcements, and business leaders were able to report some small gains. In the commercial and carrier channels, the company saw year over year growth of about 1 percent, and a total of 2 percent growth was predicted by the end of the year.
Consolidated Communications [NASDAQ: CNSL] saw its strongest results in the carrier channel. Demand for infrastructure to support wholesale, local, and regional ethernet is strong, and Consolidated Communications’ 37,000 route miles of fiber network provide connectivity to a number of communities.
In many cases, other carriers become clients of Consolidated Communications, as they need access to Consolidated Communications’ infrastructure to reach their own customers.
Year over year, tower connections under contract increased by 5 percent, for a total of 3,790 tower connections – a record high for Consolidated Communications.
Contracts are in place to upgrade bandwidth on 125 existing tower connections in coming months, ensuring the company met – and in some cases exceeded – quarterly goals for billed revenue.
Overall, total revenue for the quarter came in at $333.5 million – a year over year decline. Some of that was driven by the fact that consumers are moving to providers who offer advanced technology.
Consumer revenue decreased by $6.6 million or 4.8 percent for the quarter, due in large part to the trend away from traditional voice and video. Growth in consumer broadband revenue offset a small portion of the total revenue loss.
Next Steps for Consolidated Communications
Going forward, the company’s strategy is to focus on paying down debt, increasing fiber infrastructure, winning new clients, and reducing client churn – particularly in the financial and healthcare industries.
There is substantial opportunity for full-service providers to make inroads with small and medium-sized providers of financial services and healthcare, because such businesses need state of the art communication and security solutions. However, most are not in a position to build and maintain such infrastructure on their own.
Consolidated Communications [NASDAQ: CNSL] is developing products on the residential side as well. One of the most promising is an advanced television/video bundle that will launch in Northern New England.
The cloud-based service offers customers 200 channels, along with features like television replay and rewind, and voice-activated remote control.
Better still, consumers will not have to purchase or rent set-top boxes or arrange for installation, which promises to dramatically improve the customer experience.
Consolidated Communications Stock Forecast
Consolidated Communications stock prices were already fairly low before the first quarter earnings call, and the decline after that call exacerbated the problem. Despite some small gains, the second quarter report did nothing to boost investors’ interest in buying shares.
Certainly, the company has developed a workable strategy for the near future, but the fact is that few industry experts have confidence that these small measures will be a match for the large competitors in this space.
With the elimination of the dividend, there is very little upside to buying Consolidated Communications [NASDAQ: CNSL] at this time.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.