Zayo Group Holdings, Inc. ZAYO recently augmented the network connectivity between Montreal, Quebec to Albany, New York with the expansion of its fiber network infrastructure in the region. The move will enable the company to provide high-quality connectivity to support the seamless transition of enterprise and mobile carrier customers to 5G technology.
The network expansion will add about 100G capable new wavelength route miles to connect the largest city in Quebec, Canada with one of the busiest cities in the United States. The extensive wavelength network is expected to benefit regional business and enterprise customers with dedicated bandwidth facility for data-intensive content, streaming services and IoT applications. The shorter and more direct route between the cities of two neighboring countries is likely to be operational by January 2020.
Zayo is well poised to benefit from a diversified blue-chip customer base that comprises the largest and most sophisticated users of bandwidth. It aims to grow the network business at 5% and beyond while controlling expenses to boost OpEx efficiency. The company emphasizes on less than 12-month payback deals while leaning into strategic investments like e-rate deals, mobile infrastructure and long-haul fiber. Such deals leverage its existing assets in conjunction with new builds. These are likely to deliver strong free cash flow yields and attractive returns on invested capital.
Markedly, Zayo’s multi-site data center portfolio, ability to customize its solutions and capability to connect globally over its network are key growth drivers.
Management is bullish about the prospects of its largest business segment, Fiber Solutions, as it is witnessing a very strong deal momentum. We also remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) company. Over the past year, the stock has outperformed the industry with an average return of 51.6% compared with the 23.1% rise of the latter.
Better-ranked stocks in the broader industry include KT Corporation KT, PLDT Inc. PHI and Mobile TeleSystems PJSC MBT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
KT Corporation has a long-term earnings growth expectation of 11.5%.
PLDT is currently trading at a forward P/E of 8.1x.
Mobile TeleSystems has a long-term earnings growth expectation of 4.9%.
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