Cincinnati Bell (CBB) Displays Bright Prospects Amid Risks

On Dec 24, we issued an updated research report on Cincinnati Bell Inc (NYSE:CBB) .

Existing Scenario

Cincinnati Bell is focused on transforming itself from a legacy copper-based telecommunications company into a technology firm with contemporary fiber assets, servicing both consumers and businesses with flexible data, video, voice and IP solutions. With a well-designed marketing program, popular brand value and strong reputation of offering high-quality service, the company expects to increase its Entertainment and Communications revenues.

In the Entertainment and Communications business, the company’s investments in Fioptics products, which provide entertainment, high-speed Internet and traditional voice via fiber line to home, are on an uptrend. Moreover, the company intends to continue investing in Fioptics networks to enhance customer experience, thus improving ARPU and checking churn. In this regard, the introduction of MyTV through its Fioptics high-speed Internet service bodes well.

Moreover, in July, the company completed the acquisition of Hawaiian Telcom Holdco, Inc. The merger takes Cincinnati Bell a step forward toward expanding its portfolio of next-generation fiber offerings and securing fiber density value for customers and shareholders. It positions the company at the forefront of innovation in telecommunications and establishes a platform for future growth.

However, in the past month, this Zacks Rank #3 (Hold) stock has lost 44.9% compared with the industry’s decline of 6%.

Also, the company continues to experience erosion in high margin local access lines. With Digital Subscriber Line and cable modems gaining widespread acceptance, customers are deactivating the extra phone lines that were used to access the Internet via dial-up modem. This apart, intensifying competition in the company’s operational region can be a drag on its pricing power, thereby inducing downward pressure on its margins, going ahead.

Stocks to Consider

Some better-ranked stocks from the same space are Shenandoah Telecommunications Co (NASDAQ:SHEN) , Otter Tail Corporation (NASDAQ:OTTR) and Ameren Corporation (NYSE:AEE) . While Shenandoah Telecommunications and Otter Tail sport a Zacks Rank #1 (Strong Buy), Ameren carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shenandoah Telecommunications surpassed estimates thrice in the trailing four quarters, the average positive earnings surprise being 86.67%.

Otter Tail outpaced estimates thrice in the preceding four quarters, the average earnings surprise being 18.55%.

Ameren exceeded estimates in each of the preceding four quarters, the average positive earnings surprise being 15.40%.

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