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CenturyLink (CTL) Q4 Earnings and Revenues Miss Estimates

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CenturyLink Inc. (CTL - Free Report) reported disappointing financial results in the fourth quarter of 2017, wherein both the top and bottom line missed the Zacks Consensus Estimate. Notably, CenturyLink completed the acquisition of Level 3 Communications Inc. in November 2017.

Net Income

CenturyLink's net income in fourth-quarter 2017 was $1,117 million or $1.26 per share, compared with $42 million or 8 cents in the year-ago quarter. However, adjusted earnings per share of 18 cents lagged the Zacks Consensus Estimate of 22 cents.

CenturyLink, Inc. Price, Consensus and EPS Surprise

 

Revenues

Total revenues in fourth-quarter 2017 were $5,323 million compared with $4,289 million in the prior-year quarter. Revenues also missed the Zacks Consensus Estimate of $5,687 million.

Operating Metrics

Quarterly operating expenses totaled $4,799 million, decreasing 24% year over year. Operating income increased to $524 million from $405 million in the prior-year quarter.  Operating income margin was 9.8% compared with 9.4% in the year-ago quarter. Adjusted EBITDA decreased to $2,211 million from $2,235 million in the year-ago quarter. Adjusted EBITDA margin was 36.8% compared with 36.6% in the year-ago quarter.

Cash Flow

In 2017, CenturyLink generated $3,877 million of net cash from operations compared with $4,608 million in 2016. In 2017, free cash flow was $771 million compared with $1,627 million in 2016.

Liquidity

At the end of 2017, CenturyLink had $551 million of cash and cash equivalents compared with $222 million at the end of 2016. Total debt was $37,726 million compared with $18,185 million at the end of 2016. The debt-to-capitalization ratio was 0.61 compared with 0.58 at the end of 2016.

Segmental Results

Proforma consolidated revenues for Business segment was $4,415 million, down 0.8% year over year. Consumer segment contributed $1,401 million, down 5.7% and Regulatory revenues were $189 million, up 7.4%. Within the Business segment, Small and Mid-sized business revenues were $874 million, down 4.8%. Enterprise revenues were $1,324 million, up 4.8%, International & Global Accounts generated $941 million, up 4% and Wholesale & Indirect revenues were $1,276 million, down 6.5%.

By service type, IP & Data services generated $1,839 million, up 2.1% year over year. Transport & Infrastructure were $2,092 million, down 1.7%, Voice & Collaboration revenues were $1,716 million, down 7.1%, IT & Managed services contributed $168 million, up 7% and Regulatory revenues were $189 million, up 7.4%.

Subscriber Statistics

As of  Dec 31, 2017, total access lines were 10.282 million, down 7.3% year over year. High-speed broadband customer count was 5.662 million, down 4.8% year over year.  

2018 Outlook

Adjusted EBITDA is anticipated in the range of $8.75 - $8.95 billion. Free cash flow is expected in the range of $3.15 - $3.35 billion. Free cash flow after dividend will be $0.85 - $1.05 billion. Capital expenditure will be around 16% of revenues.

Recent Development

The growing momentum of CenturyLink’s Prism IPTV service has prompted it to unveil a beta version of over-the-top (OTT) TV services. By foraying into the OTT 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 and Sony Corp.’s (SNE - Free Report) PlayStation Vue. CenturyLink currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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