INTRODUCTION
In our last article we said Frontier Communications’ (FTR) major challenge is to stop the continuous bleed in revenue. Frontier Communications released their 2013 second quarter results on August 7. The good news was EPS and revenue was in line with estimates giving support to the stock price. The bad news is revenue trends have not improved. The trends were already on a downward path so we expected FTR to at worst follow the trend line or at best start to show progress by nudging the trend lines upward, even if only slightly. Based on the revenue challenge ahead of them this article will limit the discussion to the following:
- Revenue trend
- Customer retention
- Effects on FCF estimates (& by default the dividend)
- Conclusion
Based on the trends, which is shorthand for measuring management’s performance, we can derive some insight into the safety of the dividend.
REVENUE TREND
We’ll start by comparing the trends from our last article, i.e., the trend based on results through 1Q13 to the trend generated using the most recent quarter (2Q13). The graph measures management’s efforts to bend the curve upward. First the residential trends:
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