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Bear of the Day: CenturyLink, Inc (CTL)

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CenturyLink, Inc. (CTL - Free Report) , a Zacks Rank #5 (Strong Sell) is a telecommunications company that provides broadband, voice and wireless services to consumers and businesses in the United States. It also offers entertainment services under the CenturyLink, Prism TV and DIRECTV brands. In addition, the company provides data, voice and managed services to business, government and wholesale customers in local, national and select international markets through its fiber optic network and multiple data centers. CenturyLink, Inc., formerly known as CenturyTel, Inc., is headquartered in Monroe, Louisiana.

Recent Earnings Data

In its most recent earnings report, the company missed both the Zacks consensus earnings and revenue estimates.  Further, this was the fourth consecutive quarter that the company missed on the bottom line. Reported earnings were down -25% while revenues declined by -7.9%.  Management commented that sales issues ahead of its merger close (Level 3 communications), and higher capex were the reasons for the disappointing earnings results.  There is also a concern that management might have to cut its future dividends due to these issues.  

Management’s Take

According to Glen Post, CEO, “Although below our expectations, CenturyLink's third quarter 2017 high bandwidth services revenue increased more than five percent on a normalized basis year-over-year. This, together with Level 3's performance, reflects the continuing growth in demand for bandwidth and supports our belief that our increased scale and reach creates even greater potential for us to win in the marketplace. In addition, our commitment to enable market-leading customer experience and drive efficiencies into our business gives us great opportunity to grow adjusted EBITDA and free cash flow.”

Price and Earnings Consensus Graph

As you can see in the graph below, the stock price has been under pressure since the beginning of 2017.

CenturyLink, Inc. Price and Consensus

CenturyLink, Inc. Price and Consensus | CenturyLink, Inc. Quote

Declining Earnings Estimates

Over the past 60 days earnings estimates have fallen for Q4 17, Q1 18, FY 17 and FY 18; Q4 17 dropped from $0.39 to $0.27, Q1 18 fell from $0.47 to $0.32, FY 17 was trimmed from $1.81 to $1.60, and FY 18 was reduced from $1.40 to $1.15.

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