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What's in the Cards for CenturyLink (CTL) in Q2 Earnings?

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CenturyLink Inc. (CTL - Free Report) , a leading regional wireline service provider in the U.S, is scheduled to report second-quarter 2017 financial numbers on Aug 2, after market closes.

Last quarter, the company posted a negative earnings surprise of 1.89%. The company’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters, with an average beat of 0.79%.

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

Factors at Play

The price performance of CenturyLink has been depressing over the last three months. The stock lost 7%, whereas the industry declined 0.2% over the same time frame.

The company continues to face persistent losses in its access lines and legacy voice services on an organic basis. This is primarily because, in addition to large telecommunications providers, the company faces intense competition from cable TV operators and other wireless companies that aggressively offer traditional voice service over their networks. Improvements in the quality of VoIP services have enabled cable TV, internet, and telephone companies to offer services at attractive price points.

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. CenturyLink unveiled disappointing guidance for certain important metrics for the second quarter of 2017 compared with the last reported outlook for the first quarter of 2017.

However, the company remains focused on establishing itself as a global leader in cloud infrastructure and hosted IT solutions arena for enterprise customers. Recently, it unveiled a beta version of its over-the-top (OTT) TV service. By foraying into this space, the company has joined the likes of DISH Network Corp.’s (DISH - Free Report) Sling TV and AT&T Inc.’s (T - Free Report) DirecTV Now. Moreover, CenturyLink is investing in fiber-to-the-tower (FTTT) expansion and has expanded its fiber-based backhaul services.

Earnings Whispers     

Our proven model does not conclusively show that CenturyLink is likely to beat on earnings 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. That is not the case here, as you will see below.

Zacks ESP: CenturyLink has an Earnings ESP of -2.04%. This is because the Most Accurate estimate stands at 48 cents while the Zacks Consensus Estimate stands higher at 49 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 #3, which increases the predictive power of ESP. However, the company’s -2.04% 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

Stock to Consider

Vishay Intertechnology, Inc. (VSH - Free Report) from the broader industry has the right combination of elements to post an earnings beat when it expectedly reports second-quarter 2017 results on Aug 3. The company has an Earnings ESP of +6.06% and a Zacks Rank #1.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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