Telecommunications and cable services provider Altice USA (NYSE:ATUS) reported results in line with analysts’ expectations in Q4 FY2023, with revenue down 2.9% year on year to $2.30 billion. It made a GAAP loss of $0.26 per share, improving from its loss of $0.43 per share in the same quarter last year.
Is now the time to buy Altice USA? Find out by accessing our full research report, it’s free.
Altice USA (ATUS) Q4 FY2023 Highlights:
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Revenue: $2.30 billion vs analyst estimates of $2.29 billion (small beat)
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EPS: -$0.26 vs analyst estimates of $0.07 (-$0.33 miss)
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Free Cash Flow of $201 million, up 65.7% from the previous quarter
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Gross Margin (GAAP): 67.6%, in line with the same quarter last year
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Broadband Subscribers: 4.17 million (slight miss)
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Video Subscribers: 2.17 million (in line)
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Market Capitalization: $927.7 million
Based in Long Island City, Altice USA (NYSE:ATUS) is a telecommunications company offering cable, internet, telephone, and television services across the United States.
Cable and Satellite
The massive physical footprints of fiber in the ground or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their traditional cable subscriptions in favor of streaming options. While that is a headwind, this affinity to streaming means more households need high-speed internet, and companies that successfully serve customers can enjoy high retention rates and pricing power since the options for internet connectivity in any geography is usually limited.
Sales Growth
Examining a company’s long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Altice USA’s revenue was flat over the last five years.
Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That’s why we also follow short-term performance. Altice USA’s recent history shows a reversal from its five-year trend, as its revenue has shown annualized declines of 4.3% over the last two years.
We can understand the company’s revenue dynamics even better by analyzing its number of Broadband Subscribers and Paid Television Subscribers, which clocked in at 4.17 million and 2.17 million in the latest quarter. Over the last two years, Altice USA’s Broadband Subscribers averaged 2% year-on-year declines while its Paid Television Subscribers averaged 10.3% year-on-year declines.
This quarter, Altice USA reported a rather uninspiring 2.9% year-on-year revenue decline to $2.30 billion of revenue, in line with Wall Street’s estimates. Looking ahead, Wall Street expects revenue to decline 2.1% over the next 12 months.
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Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Over the last two years, Altice USA has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 3%, subpar for a consumer discretionary business.
Altice USA’s free cash flow came in at $201 million in Q4, equivalent to a 8.7% margin. This result was great for the business as it flipped from cash flow negative in the same quarter last year to cash flow positive this quarter.
Key Takeaways from Altice USA’s Q4 Results
Broadband Subscribers unfortunately missed analysts’ expectations while Video Subscribers (a smaller part of the business) was in line. Revenue slightly exceeded expectations but operating margin missed Wall Street’s estimates. Overall, the results were mixed and no forwardguidance was given in the earnings release. The stock is up 2.3% after reporting and currently trades at $2.2 per share.
So should you invest in Altice USA right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
