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CenturyLink (CTL) Lags Q1 Earnings and Revenue Estimates

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CenturyLink Inc. reported weak financial results in the first quarter of 2017 (ended Mar 31, 2017), wherein both the bottom line and the top line fell short of the Zacks Consensus Estimate.

Net Income

CenturyLink's net income in first-quarter 2017 was $163 million or 30 cents per share compared with $236 million or 44 cents per share in first-quarter 2016. Adjusted earnings per share (EPS) of 52 cents missed the Zacks Consensus Estimate by 1 cent. Moreover, the bottom line declined 26.76% on a year-over-year basis.

 

 

Revenue

Quarterly total revenue of $4,209 million was down 4.36% from the prior-year quarter and below the Zacks Consensus Estimate of $4,268.9 million. Of the total, strategic revenues totaled $2,000 million, up 0.6% year over year. Legacy revenues accounted for $1,803 million, down 9.3%. Data Integration revenues grossed $118 million, up 1.7%. Other services contributed the remaining $288 million, down 6.5%.

Operating Metrics

Quarterly operating expenses totaled $3,578 million, down 3.6% year over year. Meanwhile, operating income was $631 million compared with $688 million in the year-ago quarter. Operating income margin was 15.0% versus 15.6% in the year-ago quarter.

Cash Flow

In the first quarter of 2017, CenturyLink generated $1,057 million of net cash from operations compared with $1,423 million in the year-ago quarter. Adjusted free cash flow was $492 million compared with $824 million in the year-ago quarter.

Liquidity

At the end of Mar 2017, CenturyLink had $214 million of cash and cash equivalents compared with $438 million at the end of Mar 2016. Total debt was $18,180 million compared with $18,185 million at the end of Dec 2016. Meanwhile, the debt-to-capitalization ratio was 0.39, unchanged from year-end 2016.

Segmental Results

Business segment revenues dropped 3.5% year over year to $2,356 million in the first quarter. Segmental profits were $1,035 million compared with $1,123 million in the year-ago quarter. Segmental profit margin was 43.9% compared with 46.0% in the year-ago quarter.

Consumer segment revenues were $1,412 million, down 5.2% year over year. Segmental profits were $803 million compared with $878 million in the year-ago quarter. Segmental profit margin was 56.9% compared with 59.0% in the year-ago quarter.

Subscriber Statistics

As of Mar 31, 2017, total access lines were 10.945 million, down 5.7% year over year. High-speed broadband customer count was 5.945 million, down 1.83%.

CenturyLink, Inc. Price, Consensus and EPS Surprise

 

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

Q2 Outlook

For the second quarter of 2017, the company projects adjusted earnings per share and operating revenues in the range of 46 cents to 52 cents and $4.07 billion to $4.13 billion, respectively. Core revenues are estimated in the range of $3.66 billion to $3.72 billion. Operating cash flow is projected between $1.40 billion and $1.46 billion.

Recent Development

In Mar 2017, CenturyLink and Level 3 Communications Inc. moved a step closer to completing their proposed merger amid overwhelming approval of shareholders of both sides. The cash and stock deal is expected to close by the end of third quarter of 2017, subject to customary regulatory approvals. The merged entity will be able to compete with telecom giants like AT&T Inc. (T - Free Report) and Verizon Communications Inc. (VZ - Free Report) . CenturyLink currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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