Why Communications Sales & Leasing, Inc. Fell 12% Today

By Anders BylundMarketsFool.com

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What happened

Shares of Communications Sales & Leasing (NASDAQ: CSAL) fell as much as 12.1% in Monday's morning session. The former infrastructure arm of Windstream Holdings (NASDAQ: WIN) released third-quarter results earlier this morning, giving investors a perfect opportunity to revisit their CS&L investment theses.

So what

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In the third quarter, CS&L saw the non-GAAP profit measure known as adjusted funds from operations (or AFFO) rising 7% year over year to $0.65 per diluted share. Revenue increased 15%, landing at $200.2 million.

Your average analyst would have settled for AFFO of $0.62 per share on something like $199 million in top-line sales. CS&L exceeded both of these analyst targets.

Looking ahead, CS&L's management raised their full-year AFFO guidance from $2.59 per share to $2.61 per share.

Now what

So the company delivers a beat-and-raise report, and share prices plunge. What gives?

Well, even after today's steep drop and a general slide over the last three months, CS&L shares are still trading up by a market-beating 25% so far in 2016. Market makers are still getting their bearings on this unusual business model, leaving lots of room for sudden price swings in either direction.

As a CS&L shareholder myself, I kind of appreciate the stock cooling down a bit. The stock comes with a hefty 10% dividend yield, and I have enrolled my shares in a dividend reinvestment program. So when CS&L pays out $0.60 per share on Jan. 13, I don't mind getting more bang for my dividend buck via lower share prices.

Someday, CS&L will settle down and start behaving like the boring infrastructure cash machine that it is. Until then, these wild swings could serve as solid buy-in opportunities.

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Anders Bylund owns shares of Communications Sales and Leasing. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days.

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