It has been about a month since the last earnings report for CenturyLink, Inc. . Shares have lost about 13.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
CenturyLink Misses Q3 Earnings and Revenue Estimates
CenturyLink reported disappointing financial results in the third quarter of 2017, wherein both the top and the bottom line missed the Zacks Consensus Estimate. Notably, CenturyLink recently completed the acquisition of Level 3 Communications Inc.
Net Income
CenturyLink's net income in third-quarter 2017 was $92 million or 17 cents per share compared with $152 million or 28 cents in the year-ago quarter. Adjusted earnings per share of 42 cents missed the Zacks Consensus Estimate of 45 cents.
Revenues
Total revenues in third-quarter 2017 were $4,034 million compared with $4,382 million in the prior-year quarter. The decrease might have been due to a decline in legacy, strategic and data integration revenues. Revenues also missed the Zacks Consensus Estimate of $4,061 million.
Of the total, strategic revenues amounted $1,892 million, reflecting a decline of 7% year over year. Legacy revenues accounted for $1,705 million, down 10% year over year. Data Integration revenues grossed $134 million, decreasing 18% year over year. Other services contributed the remaining $303 million flat year over year.
Operating Metrics
Quarterly operating expenses totaled $3,547 million, decreasing 6% year over year. Operating income decreased to $487 million from $593 million in second-quarter 2016. Operating income margin was 12.1% compared with 13.5% in the year-ago quarter. Adjusted EBITDA decreased to $1,397 million from $1,596 million in the year-ago quarter. Adjusted EBITDA margin was 36.2% compared with 36.4% in the year-ago quarter.
Cash Flow
In the third quarter of 2017, CenturyLink generated $958 million of net cash from operations compared with $911 million in the year-ago quarter. In the reported quarter, adjusted free cash flow was $109 million compared with $186 million in the year-ago quarter.
Liquidity
At the end of the reported quarter, CenturyLink had $160 million of cash and cash equivalents compared with $222 million at the end of December 2016. Total debt was $24,978 million compared with $18,185 million at the end of December 2016. The debt-to-capitalization ratio was 0.66 compared with 0.58 at the end of December 2016.
Segmental Results
Enterprise segment revenues declined 11.2% year over year to $2,171 million in the third quarter. Total expenses decreased from $1,452 million in the prior-year quarter to $1,292 million in the reported quarter. Segmental income was $879 million compared with $1,019 million in the year-ago quarter. Segmental income margin was 40.5% compared with 41.7% in the year-ago period
Consumer segment revenues were $1,387 million, reflecting a decline of 5.8% year over year. Total expenses declined from $643 million in third-quarter 2016 to $621 million in the third quarter of 2017. Segmental income was $766 million compared with $829 million in the prior-year quarter. Segmental income margin was 55.2% compared with 56.3% in the year-ago quarter.
Subscriber Statistics
As of Sep 30, 2017, total access lines were 10.506 million, down 6.5% year over year. High-speed broadband customer count was 5.767 million, down 3.1% year over year.
Outlook
The company anticipates standalone CenturyLink full-year 2017 results to be below its guidance provided in February (adjusted for the Colocation Sale), primarily due to lower strategic revenue growth during the year and higher capital expenditures than originally anticipated. Additionally, CenturyLink has reiterated standalone Level 3 Communication Inc. full-year 2017 outlook.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been seven revisions lower for the current quarter. In the past month, the consensus estimate has shifted by lower 50.8% due to these changes.
VGM Scores
At this time, CenturyLink's stock has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We expect below average returns from the stock in the next few months.
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CenturyLink (CTL) Down 13.2% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for CenturyLink, Inc. . Shares have lost about 13.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
CenturyLink Misses Q3 Earnings and Revenue Estimates
CenturyLink reported disappointing financial results in the third quarter of 2017, wherein both the top and the bottom line missed the Zacks Consensus Estimate. Notably, CenturyLink recently completed the acquisition of Level 3 Communications Inc.
Net Income
CenturyLink's net income in third-quarter 2017 was $92 million or 17 cents per share compared with $152 million or 28 cents in the year-ago quarter. Adjusted earnings per share of 42 cents missed the Zacks Consensus Estimate of 45 cents.
Revenues
Total revenues in third-quarter 2017 were $4,034 million compared with $4,382 million in the prior-year quarter. The decrease might have been due to a decline in legacy, strategic and data integration revenues. Revenues also missed the Zacks Consensus Estimate of $4,061 million.
Of the total, strategic revenues amounted $1,892 million, reflecting a decline of 7% year over year. Legacy revenues accounted for $1,705 million, down 10% year over year. Data Integration revenues grossed $134 million, decreasing 18% year over year. Other services contributed the remaining $303 million flat year over year.
Operating Metrics
Quarterly operating expenses totaled $3,547 million, decreasing 6% year over year. Operating income decreased to $487 million from $593 million in second-quarter 2016. Operating income margin was 12.1% compared with 13.5% in the year-ago quarter. Adjusted EBITDA decreased to $1,397 million from $1,596 million in the year-ago quarter. Adjusted EBITDA margin was 36.2% compared with 36.4% in the year-ago quarter.
Cash Flow
In the third quarter of 2017, CenturyLink generated $958 million of net cash from operations compared with $911 million in the year-ago quarter. In the reported quarter, adjusted free cash flow was $109 million compared with $186 million in the year-ago quarter.
Liquidity
At the end of the reported quarter, CenturyLink had $160 million of cash and cash equivalents compared with $222 million at the end of December 2016. Total debt was $24,978 million compared with $18,185 million at the end of December 2016. The debt-to-capitalization ratio was 0.66 compared with 0.58 at the end of December 2016.
Segmental Results
Enterprise segment revenues declined 11.2% year over year to $2,171 million in the third quarter. Total expenses decreased from $1,452 million in the prior-year quarter to $1,292 million in the reported quarter. Segmental income was $879 million compared with $1,019 million in the year-ago quarter. Segmental income margin was 40.5% compared with 41.7% in the year-ago period
Consumer segment revenues were $1,387 million, reflecting a decline of 5.8% year over year. Total expenses declined from $643 million in third-quarter 2016 to $621 million in the third quarter of 2017. Segmental income was $766 million compared with $829 million in the prior-year quarter. Segmental income margin was 55.2% compared with 56.3% in the year-ago quarter.
Subscriber Statistics
As of Sep 30, 2017, total access lines were 10.506 million, down 6.5% year over year. High-speed broadband customer count was 5.767 million, down 3.1% year over year.
Outlook
The company anticipates standalone CenturyLink full-year 2017 results to be below its guidance provided in February (adjusted for the Colocation Sale), primarily due to lower strategic revenue growth during the year and higher capital expenditures than originally anticipated. Additionally, CenturyLink has reiterated standalone Level 3 Communication Inc. full-year 2017 outlook.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been seven revisions lower for the current quarter. In the past month, the consensus estimate has shifted by lower 50.8% due to these changes.
CenturyLink, Inc. Price and Consensus
CenturyLink, Inc. Price and Consensus | CenturyLink, Inc. Quote
VGM Scores
At this time, CenturyLink's stock has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We expect below average returns from the stock in the next few months.