Uniti Earnings: Slow and Steady, but Financial Concerns Are Driving the Stock

While Uniti’s UNIT stock has gotten crushed in 2023, the firm reported a typical first quarter. With its Windstream lease still making up most of revenue and nearly 90% of EBITDA, Uniti’s financial results remain very predictable. There was little change to the firm’s level of investment or success in growing the non-Windstream side of the business, and the company took steps in the quarter to solidify its financial footing. While the stock had a nice pop following the results, we think the current price still reflects concern that the company will go bankrupt. We think Uniti will be able to meet its financial obligations and we are maintaining our $12 fair value estimate.

Revenue grew 4% year over year, while the adjusted EBITDA margin contracted by 100 basis points to just under 80%. Modest continual margin contraction is a sign of diversification away from Windstream, as revenue on that lease generates nearly 100% margins. Bookings in the quarter were for $600 million in annualized revenue, lower than the average $900 million each quarter of 2022 but not concerning considering typical lumpiness in bookings. Uniti affirmed its full-year sales and EBITDA guidance and raised its outlook for net income and funds from operations.

Uniti entered an agreement in March to ensure access to $500 million on a revolving credit facility through 2027, and it recently refinanced debt to push nearly all maturities out to 2027 or later. Uniti currently has about $500 million in available liquidity. We don’t expect it to have any issues meeting interest payments, and we see very little risk that its business falters, with the Windstream lease running through 2030.