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CenturyLink (CTL) Q2 Earnings Top Estimates, Revenues Down
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CenturyLink, Inc. reported decent second-quarter 2020 results, with the top and bottom line beating the Zacks Consensus Estimate. However, lower revenues in the Consumer, Wholesale, SMB and IGAM segments led to year over year top-line contraction.
Net Income
Net income in the June quarter was $377 million or 35 cents per share compared with $371 million or 35 cents per share in the year-ago quarter. The year-over-over improvement can be attributed to lower operating expenses.
Second-quarter net income (excluding integration and transformation costs, and special items) came in at $450 million or 42 cents per share compared with $369 million or 34 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 10 cents.
CenturyLink, Inc. Price, Consensus and EPS Surprise
Quarterly total operating revenues declined 3.4% year over year to $5,192 million due to lower sales in the Consumer, Wholesale, SMB and International and Global Accounts (IGAM) segments. Nevertheless, the top line surpassed the consensus estimate of $5,138 million.
CenturyLink’s revenues are largely recurring in nature with a well-diversified customer base. By segment, SMB revenues fell 6.1% year over year to $646 million, due to persistent deterioration in legacy voice services. Revenues in Wholesale fell 6.3% year over year to $948 million. CenturyLink expects customers to continue to optimize spending with other vendors in this environment and anticipates witnessing healthy momentum in the upcoming quarters with 5G investments.
Consumer revenues fell to $1,316 million from $1,389 million in the year-ago quarter, primarily due to decline in legacy voice revenues. However, it was partially offset by growth in Broadband. The company continues to focus on improving broadband revenue performance while boosting the penetration of competitive assets. In the reported quarter, CenturyLink saw a net loss of 29,000 total broadband subs. In speeds of 100 meg and above, it added 68,000 subs.
Revenues in IGAM declined 3.2% year over year to $849 million due to currency headwinds along with reduced levels of activity across Asia, Latin America and Europe stemming from COVID-19 related business shutdowns. Meanwhile, Enterprise revenues inched up 1.7% year over year to $1,433 million, primarily driven by solid collaboration services on the back of a revamped network infrastructure. Despite COVID-19 challenges, the company expects both IGAM and Enterprise segments to witness a significant push in their digital strategies with growing sales orders in the near term.
Other Details
Total operating expenses declined 2.5% year over year to $4,289 million, primarily due to lower SG&A and amortization expenses. Operating income was $903 million compared with $976 million in the prior-year quarter.
Adjusted EBITDA slipped to $2,085 million from $2,215 million in the year-ago quarter. The adjusted EBITDA margin was 40.2% compared with 41.2% in the year-ago quarter. Capital expenditures were $1,009 million compared with $800 million in the prior-year quarter.
Cash Flow & Liquidity
In the first six months of 2020, CenturyLink generated $3,048 million of net cash from operations compared with $2,883 million in the year-ago quarter. Free cash flow (excluding cash integration and transformation costs, and special items) for the quarter was $803 million compared with $956 million in the prior-year quarter. As of Jun 30, the company had $1,763 million in cash and equivalents with $31,414 million of long-term debt. Notably, 2020-2025 debt maturities have been reduced by approximately $14 billion.
2020 Guidance Updated
Due to uncertainties related to COVID-19, CenturyLink has withdrawn its 2020 financial outlook for adjusted EBITDA, free cash flow and capital expenditures. However, the company expects net cash interest in the range of $1.65-$1.70 billion down from the prior guidance of $1.75-$1.80 billion. Depreciation and amortization outlook remained unchanged within the range of $4.7-$4.9 billion. The effective income tax rate, too, remained unchanged and is likely to be around 28%.
Going Forward
With a resilient business model, CenturyLink ended the quarter with a strong liquidity position driven by effective capital allocation decisions and refinancing activities announced in the last year. It continues to execute strategy around four key areas — investing in growth through product and network expansions, delivering enhanced customer experience across business, transforming operations to improve efficiency and employee experience as well as deleveraging to strengthen its balance sheet. The Monroe, LA-based communications company’s fiber and IP-based network capacity along with its robust liquidity position, positions it well to support customers and deliver long-term shareholders’ value.
Calix’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 59.7%, on average.
Turtle Beach’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 46.4%, on average.
Cogent’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter earnings surprise of 12.3%, on average.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
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Image: Bigstock
CenturyLink (CTL) Q2 Earnings Top Estimates, Revenues Down
CenturyLink, Inc. reported decent second-quarter 2020 results, with the top and bottom line beating the Zacks Consensus Estimate. However, lower revenues in the Consumer, Wholesale, SMB and IGAM segments led to year over year top-line contraction.
Net Income
Net income in the June quarter was $377 million or 35 cents per share compared with $371 million or 35 cents per share in the year-ago quarter. The year-over-over improvement can be attributed to lower operating expenses.
Second-quarter net income (excluding integration and transformation costs, and special items) came in at $450 million or 42 cents per share compared with $369 million or 34 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 10 cents.
CenturyLink, Inc. Price, Consensus and EPS Surprise
CenturyLink, Inc. price-consensus-eps-surprise-chart | CenturyLink, Inc. Quote
Revenues
Quarterly total operating revenues declined 3.4% year over year to $5,192 million due to lower sales in the Consumer, Wholesale, SMB and International and Global Accounts (IGAM) segments. Nevertheless, the top line surpassed the consensus estimate of $5,138 million.
CenturyLink’s revenues are largely recurring in nature with a well-diversified customer base. By segment, SMB revenues fell 6.1% year over year to $646 million, due to persistent deterioration in legacy voice services. Revenues in Wholesale fell 6.3% year over year to $948 million. CenturyLink expects customers to continue to optimize spending with other vendors in this environment and anticipates witnessing healthy momentum in the upcoming quarters with 5G investments.
Consumer revenues fell to $1,316 million from $1,389 million in the year-ago quarter, primarily due to decline in legacy voice revenues. However, it was partially offset by growth in Broadband. The company continues to focus on improving broadband revenue performance while boosting the penetration of competitive assets. In the reported quarter, CenturyLink saw a net loss of 29,000 total broadband subs. In speeds of 100 meg and above, it added 68,000 subs.
Revenues in IGAM declined 3.2% year over year to $849 million due to currency headwinds along with reduced levels of activity across Asia, Latin America and Europe stemming from COVID-19 related business shutdowns. Meanwhile, Enterprise revenues inched up 1.7% year over year to $1,433 million, primarily driven by solid collaboration services on the back of a revamped network infrastructure. Despite COVID-19 challenges, the company expects both IGAM and Enterprise segments to witness a significant push in their digital strategies with growing sales orders in the near term.
Other Details
Total operating expenses declined 2.5% year over year to $4,289 million, primarily due to lower SG&A and amortization expenses. Operating income was $903 million compared with $976 million in the prior-year quarter.
Adjusted EBITDA slipped to $2,085 million from $2,215 million in the year-ago quarter. The adjusted EBITDA margin was 40.2% compared with 41.2% in the year-ago quarter. Capital expenditures were $1,009 million compared with $800 million in the prior-year quarter.
Cash Flow & Liquidity
In the first six months of 2020, CenturyLink generated $3,048 million of net cash from operations compared with $2,883 million in the year-ago quarter. Free cash flow (excluding cash integration and transformation costs, and special items) for the quarter was $803 million compared with $956 million in the prior-year quarter. As of Jun 30, the company had $1,763 million in cash and equivalents with $31,414 million of long-term debt. Notably, 2020-2025 debt maturities have been reduced by approximately $14 billion.
2020 Guidance Updated
Due to uncertainties related to COVID-19, CenturyLink has withdrawn its 2020 financial outlook for adjusted EBITDA, free cash flow and capital expenditures. However, the company expects net cash interest in the range of $1.65-$1.70 billion down from the prior guidance of $1.75-$1.80 billion. Depreciation and amortization outlook remained unchanged within the range of $4.7-$4.9 billion. The effective income tax rate, too, remained unchanged and is likely to be around 28%.
Going Forward
With a resilient business model, CenturyLink ended the quarter with a strong liquidity position driven by effective capital allocation decisions and refinancing activities announced in the last year. It continues to execute strategy around four key areas — investing in growth through product and network expansions, delivering enhanced customer experience across business, transforming operations to improve efficiency and employee experience as well as deleveraging to strengthen its balance sheet. The Monroe, LA-based communications company’s fiber and IP-based network capacity along with its robust liquidity position, positions it well to support customers and deliver long-term shareholders’ value.
Zacks Rank & Stocks to Consider
CenturyLink currently has a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader industry are Calix, Inc. (CALX - Free Report) , Turtle Beach Corporation (HEAR - Free Report) and Cogent Communications Holdings, Inc. (CCOI - Free Report) . While Calix sports a Zacks Rank #1 (Strong Buy), Turtle Beach and Cogent carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Calix’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 59.7%, on average.
Turtle Beach’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 46.4%, on average.
Cogent’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter earnings surprise of 12.3%, on average.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>