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Will CenturyLink (CTL) Spring a Surprise in Q3 Earnings?

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CenturyLink Inc. CTL is scheduled to report third-quarter 2017 numbers on Nov 8, after market close.

The leading regional wireline service provider has a negative earnings surprise history. The company lagged the Zacks Consensus Estimate in three of the trailing four quarters, with an average miss of 2.44%.

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

Factors at Play

CenturyLink remains focused on establishing itself as a global leader in cloud infrastructure and hosted-IT solutions arena for enterprise customers. The company is opting for managed Wi-Fi services to cater to the demands of small and mid-sized business (SMBs) and to lure customers from cable-TV operators and Competitive local exchange carriers (CLEC). CenturyLink has also unveiled Dedicated Cloud Compute (DCC) Foundation, which is an updated version of private cloud service. CenturyLink is investing in fiber-to-the-tower (FTTT) expansion and has expanded its fiber-based backhaul services. The company is focused on bringing improved operating efficiencies through a number of methods including network simplification and rationalization.

Further, the growing momentum of CenturyLink’s Prism IPTV service has prompted it to unveil a beta version of over the top (OTT) TV services in June 2017. By foraying into the OTT space, the company has joined the likes of DISH Network Corp.’s DISH Sling TV and AT&T Inc.’s T DirecTV Now. CenturyLink’s efforts to fortify itself in the enterprise-wide business segment and boost its fiber and cloud suite, by inking different deals also look impressive.

We also appreciate CenturyLink’s quarterly dividend payout of 54 cents a share on Sep 15, 2017, to shareholders of record as of Sep 5, 2017.

However, the company continues to face persistent losses in access lines and legacy voice services, on an organic basis. Further, decline in subsidy payments by the Federal Universal Service Fund, tough competition, federal regulations, labour union issues and

In the past three months, shares of CenturyLink have lost 26.7% compared with the industry’s decline of 10.0%.



Expected Subscriber Statistics and Segmental Revenues

In third-quarter 2017, total access lines were 1.567 million compared with 10.7333 million in the last reported quarter.  High-speed broadband customer count is expected around 5.832 million in the to-be reported quarter, down from 5.868 million in the prior-year quarter. 

Business segment revenues are pegged at $2,199 million in third-quarter 2017 compared with $2,215 million in the year-ago period. Consumer segment revenues are expected at $1,391 million compared with $1,402 million in the previous quarter.

Earnings Whispers

Our proven model does not conclusively show a beat for CenturyLink 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. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: CenturyLink has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 45 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 0.00% ESP makes surprise prediction difficult.

CenturyLink, Inc. Price and EPS Surprise


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

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.

Key Pick

Here is a company in the broader Computer and Technology sector— which houses CenturyLink — that has the right combination of elements to post an earnings beat this quarter.

Facebook Inc (FB - Free Report) is expected to release fourth-quarter 2017 results on Feb 7. The company has an Earnings ESP of +1.12% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings surpassed the Zacks Consensus Estimate in all of the previous four quarters, with average beat of 14.02%.

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