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Can CenturyLink (CTL) Pull Off a Surprise in Q1 Earnings?

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CenturyLink Inc. , a leading regional wireline service provider in the U.S., is scheduled to report first-quarter 2017 numbers on May 3, after market close.

Last quarter, the company delivered a negative earnings surprise of 3.57%. However, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 2.36%.

Over the past three months, shares of CenturyLink declined 0.1% while the Zacks classified Wireless National industry contracted 2.2%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

CenturyLink is on track with its network simplification and rationalization efforts, which have helped it to improve its end-to-end provisioning time and drive standardization. Moreover, its constant efforts to establish itself as a global leader in cloud infrastructure and the hosted IT solutions arena for enterprise customers are encouraging.

Further, the growing momentum of CenturyLink’s Prism IPTV service has prompted it to plan the launch of its over the top (OTT) services in 2017. By foraying into the OTT space, the company has joined the likes of DISH Network Corp.’s Sling TV and AT&T Inc.’s (T - Free Report) DirecTV Now. CenturyLink’s efforts to fortify itself in the enterprise-wide business segment and boost its fiber and cloud suite, by inking different deals also looks good.

We also appreciate CenturyLink’s efforts to reward its shareholders with a quarterly cash dividend of 54 cents per share, paid on Mar 17, 2017, to shareholders of record on Mar 3, 2017.

However, the company continues to face persistent losses in its access lines and legacy voice services, on an organic basis. Further, decline in subsidy payments by the Federal Universal Service Fund, tough competition, federal regulations, labor union issues and the need to upgrade technology remain headwinds.

Earnings Whispers

Our proven model does not conclusively show a beat for CenturyLink this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: CenturyLink has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 53 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CenturyLink has a Zacks Rank #2 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

CenturyLink, Inc. Price and EPS Surprise

 

CenturyLink, Inc. Price and EPS Surprise | CenturyLink, Inc. Quote

Key Pick

Here is a company in the Zacks-categorized broader Computer and Technology sector — which houses CenturyLink — that has the right combination of elements to post an earnings beat this quarter.

SBA Communications Corporation (SBAC - Free Report) is expected to release first-quarter 2017 results on May 1. The company has an Earnings ESP of +4.55% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

SBA Communications’ earnings failed to beat the Zacks Consensus Estimate in any of of the previous four quarters, resulting in an average miss of 79.81%.

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