Zayo Group’s follow-on sales, Allstream integration, net installs could lift it to record quarter, analyst says

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In a fiscal fourth quarter that saw some significant wins for Zayo Group – such as the buildout and follow-on sales around its new Sacramento-to-Salt Lake City route and its Denver Public Schools contract – net installs may be the shining star in its earnings report on Thursday evening.

“We expect a lot of focus on ZAYO's net installs and run­rate recurring revenue growth,” said Wells Fargo Senior Analyst Jennifer Fritzsche in a note to investors ahead of the company’s earnings. “ZAYO has signaled it should hit a record-high for net installs in the quarter. As mentioned, our monthly net install rate is $2.4MM. This equates to about 8% annualized run­rate growth.” 


Fritzsche said the run rate percentage is a positive. Zayo has said in the past that its goal for net installs is $3 million, with a 9 to 10 percent annualized run rate growth.

The analyst firm forecast that Zayo’s fiscal fourth-quarter revenue will come in slightly below street estimates, at $498 million, with earnings per share in line with estimates at 1 cent. Zayo’s new Allstream assets will possibly contribute $108 million in revenue, Fritzsche said.

In addition to its latest network route build between California and Utah – one on which it signed 12 new follow-on customers – Zayo has been aggressively pursuing other fiber-based service deals across several industries. Opportunities include local businesses, data centers, content providers and local school districts similar to Denver Public Schools.

Zayo will report its earnings after the market closes on Thursday.

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Zayo's aggressive network builds spell new revenue growth opportunities, says Wells Fargo