Windstream Shares Slide In Early Trading After Q1 Profits Fall 67%

Shares in Windstream Holdings Inc. were moving lower in trading Thursday after the Little Rock telecom reported that first quarter earnings fell nearly 67% following the recent spin off its real estate assets more than a week ago.

For the period ended March 31, 2015, Windstream reported net income of $5.3 million, or 5 cents per share, compared to net income of $16 million, or 15 cents per share, during the same period in 2014. Total revenues were $1.4 billion in the first quarter, a decline of 3% from the same period a year ago. Wall Street analysts had expected the company to report losses of six cents per share on revenue of $1.43 billion, according to Thomson Reuters.

“2015 has already seen significant progress, highlighted by the successful completion of the spinoff of Communications, Sales and Leasing (‘CS&L’) on April 24,” said Windstream CEO Tony Thomas. “This transaction has made Windstream a stronger company with less debt and increased capacity to invest in our network and create value for our shareholders.”

CS&L began trading last week on the Nasdaq stock exchange under the symbol “CSAL.” The new Arkansas-based publicly traded concern is believed to be the first real estate investment trust, or REIT, to solely focus on acquiring and leasing communication distribution assets, company officials said.

Thomas reiterated Windstream’s earlier promise that the company would be in a stronger position financially after the spin-off, and would also be better able to deliver shareholder value with less debt and increase capacity to invest in the company’s network.

“As we move forward, Windstream’s strategy is to provide an exceptional customer experience through a best-in-class network, with the goal of delivering improved financial results and creating value for shareholders,” Thomas said.

Overall, Windstream’s consumer broadband service revenues in the first quarter were $123 million, up 2% from the same period in 2014 due to continued demand for faster speeds and additional services.

Consumer service revenues in the first quarter were $312 million, essentially unchanged from the same period a year ago.

“We are seeing positive momentum as we continue to make investments to push fiber deeper into the network and shorten loop lengths, which has improved our capacity and broadband speed availability and are producing improving results from our broadband franchise. In addition, in April we launched ‘Kinetic,’ our new IPTV service,” Thomas said.

Carrier service revenues in the first quarter were $177 million, a decline of 7% from the same period a year ago, primarily caused by wireless carrier migrations from legacy TDM circuits to newer Ethernet technology.

Enterprise and small business service revenues were $741 million in the first quarter. Data and integrated services revenues grew approximately 3% in the first quarter from the same period a year ago to $427 million led by demand for IP-based solutions and next generation data.

Adjusted OIBDA was $495 million in the first quarter and capital expenditures were $189 million in the first quarter. Adjusted free cash flow was $232 million in the first quarter and the company paid shareholders $151 million in dividends.

After giving effect to the REIT spin-off and reverse stock split, Windstream expects to pay an annual dividend of 60 cents per share, officials said.

In Thursday’s early trading session, Windstream shares were down 38 cents, or 3.7% at $9.90. CS&L shares were trading up four cents at $28.60.