CenturyLink, Inc. (CTL - Free Report) is scheduled to report second-quarter 2018 financial results after the closing bell on Aug 8. In the last reported quarter, the company delivered a positive earnings surprise of 66.7%. However, CenturyLink missed the Zacks Consensus Estimate for earnings in three of the trailing four quarters with an average beat of 8.9%.
Let's see how things are shaping up for this announcement.
Factors at Play
CenturyLink continues to focus on improving operational efficiencies through a number of methods like network simplification and rationalization. The company’s strong network capabilities, integrated hosting and network solutions are likely to promote growth in the cloud business. Notably, the company considers its managed and cloud services as a key differentiator from other players in the market, which should boost its top line.
The company is also investing in fiber-to-the-tower expansion and has extended its fiber-based backhaul services. It expects its Managed Office and Managed Enterprise Solutions to continue gaining traction and drive revenue growth on the back of increasing demands from small and large business customers.
During the quarter, CenturyLink secured the industry’s first certifications for alliance partners from Cisco Systems, Inc. related to its cloud and managed DNA services based on the Cisco Meraki platform. The accreditation validates the ability of CenturyLink to continually deliver the highest levels of performance on certification criteria.
At the same time, CenturyLink joined forces with Google Cloud Partner Interconnect, a suite of cloud computing services by Alphabet Inc., to provide businesses with a flexible and agile network similar to the cloud, easily linking cloud environments over private and secure connections. The company’s strong network capabilities, integrated hosting and network solutions are likely to boost growth in the cloud business and strengthen its position in the market. The Zacks Consensus Estimate for second-quarter 2018 revenues is currently pegged at $5,930 million compared with $4,090 million reported in the year-ago quarter.
However, CenturyLink’s core local phone business has slowed significantly due to the substitution of traditional wireline telephone services by wireless and other competitive offerings and lower long-distance minutes of use. In addition to large telecommunications providers, the company also 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. This has eroded the profitability of the company and is likely to contract its bottom line in the quarter.
Our proven model does not conclusively show that CenturyLink is likely to beat earnings this quarter as it does not possess the key components. 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. This is not the case here as you will see below:
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and Zacks Consensus Estimate, is +15.19% with the former pegged at 26 cents and the latter at 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: CenturyLink currently has a Zacks Rank #5 (Strong Sell).
Note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Cincinnati Bell Inc. (CBB - Free Report) is slated to release quarterly numbers on Aug 8. It has an Earnings ESP of +46.15% and a Zacks Rank #3.You can see the complete list of today’s Zacks #1 Rank stocks here.
SINA Corporation (SINA - Free Report) , with an Earnings ESP of +3.55% and a Zacks Rank #2, is slated to report results on Aug 8.
Cisco Systems, Inc. (CSCO - Free Report) has an Earnings ESP of +0.36% and a Zacks Rank #3. The company is scheduled to release earnings on Aug 15.
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