Frontier Communications (NASDAQ:FTR) and Telephone & Data Systems (NYSE:TDS) are both utilities companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, valuation, risk, analyst recommendations, institutional ownership, earnings and profitability.

Insider and Institutional Ownership

71.6% of Frontier Communications shares are held by institutional investors. Comparatively, 81.9% of Telephone & Data Systems shares are held by institutional investors. 2.3% of Frontier Communications shares are held by company insiders. Comparatively, 16.3% of Telephone & Data Systems shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Telephone & Data Systems pays an annual dividend of $0.64 per share and has a dividend yield of 1.8%. Frontier Communications does not pay a dividend. Telephone & Data Systems pays out 120.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Frontier Communications has raised its dividend for 2 consecutive years and Telephone & Data Systems has raised its dividend for 44 consecutive years.

Volatility & Risk

Frontier Communications has a beta of 1.11, indicating that its stock price is 11% more volatile than the S&P 500. Comparatively, Telephone & Data Systems has a beta of 0.84, indicating that its stock price is 16% less volatile than the S&P 500.

Profitability

This table compares Frontier Communications and Telephone & Data Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Frontier Communications -16.69% -2.35% -0.22%
Telephone & Data Systems 7.96% 2.43% 1.31%

Analyst Ratings

This is a breakdown of recent ratings and price targets for Frontier Communications and Telephone & Data Systems, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Frontier Communications 5 4 0 0 1.44
Telephone & Data Systems 1 0 3 0 2.50

Frontier Communications presently has a consensus price target of $4.34, indicating a potential upside of 65.55%. Telephone & Data Systems has a consensus price target of $37.75, indicating a potential upside of 3.99%. Given Frontier Communications’ higher probable upside, research analysts clearly believe Frontier Communications is more favorable than Telephone & Data Systems.

Earnings & Valuation

This table compares Frontier Communications and Telephone & Data Systems’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Frontier Communications $9.13 billion 0.03 -$1.80 billion ($3.79) -0.69
Telephone & Data Systems $5.04 billion 0.81 $153.00 million $0.53 68.49

Telephone & Data Systems has lower revenue, but higher earnings than Frontier Communications. Frontier Communications is trading at a lower price-to-earnings ratio than Telephone & Data Systems, indicating that it is currently the more affordable of the two stocks.

Summary

Telephone & Data Systems beats Frontier Communications on 13 of the 17 factors compared between the two stocks.

About Frontier Communications

Frontier Communications Corporation provides communications services to consumer, commercial, and wholesale customers in the United States. It offers broadband, video, voice, and other services and products through a combination of fiber and copper based networks to consumer customers. The company also provides broadband, Ethernet, traditional circuit-based, and voice services; and software defined wide area network, multiprotocol label switching, and time division multiplexing data transport and optical transport services to small, medium, and large enterprises, as well as advanced hardware and network solutions and services, and customer premise equipment. In addition, it offers 24/7 technical support; wireless broadband services in selected markets; satellite TV video services; voice services, including data-based VoIP, and long distance and voice messaging services; and a package of communications services. Further, the company provides a range of access services that allow other carriers to use facilities to originate and terminate their local and long distance voice traffic. As of December 31, 2017, it served approximately 4.9 million customers and 3.9 million broadband subscribers in 29 states. The company was formerly known as Citizens Communications Company and changed its name to Frontier Communications Corporation in July 2008. Frontier Communications Corporation was founded in 1927 and is based in Norwalk, Connecticut.

About Telephone & Data Systems

Telephone and Data Systems, Inc., a telecommunications company, provides wireless, wireline, cable, and hosted and managed services in the United States. The company offers cellular services, such as postpaid national plans and prepaid service plans with voice, messaging, and data usage options; and business rate plans. It also offers wireless devices comprising handsets, tablets, mobile hotspots, home phones, and routers; and including accessories, including wireless basics, such as cases, screen protectors, chargers, and memory cards, as well as an assortment of consumer electronics comprising headphones, speakers, wearables, and home automation products. In addition, the company provides wireline and cable broadband services; digital television (TV) and digital satellite TV video services; voice services comprising local and long-distance telephone, voice over Internet protocol, find me follow me, collaboration, instant messaging, and other services; and network access services. Further, it offers a range of information technology (IT) services, including colocation, cloud and hosting solutions, managed services, and enterprise resource planning application management services; sells IT hardware, as well as provides related maintenance and professional services; and engages in planning, engineering, procurement, sale, installation, and management of IT-infrastructure solutions. Additionally, the company operates retail stores and kiosks. The company serves approximately 5.1 million wireless customers and 1.2 million wireline and cable customers. Telephone and Data Systems, Inc. sells its products through retail sales, direct sales, third-party retailers, and independent agents, as well as through Website and telesales. The company was founded in 1968 and is headquartered in Chicago, Illinois.

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