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CenturyLink (CTL) Misses Q3 Earnings and Revenue Estimates

Zacks

CenturyLink Inc. CTL reported disappointing financial results in the third quarter of 2017, wherein both the top and the bottom line missed the Zacks Consensus Estimate. Notably, CenturyLink recently completed the acquisition of Level 3 Communications Inc.

Net Income

CenturyLink's net income in third-quarter 2017 was $92 million or 17 cents per share compared with $152 million or 28 cents in the year-ago quarter. Adjusted earnings per share of 42 cents missed the Zacks Consensus Estimate of 45 cents.

CenturyLink, Inc. Price, Consensus and EPS Surprise


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

Revenues

Total revenues in third-quarter 2017 were $4,034 million compared with $4,382 million in the prior-year quarter. The decrease might have been due to a decline in legacy, strategic and data integration revenues. Revenues also missed the Zacks Consensus Estimate of $4,061 million.

Of the total, strategic revenues amounted $1,892 million, reflecting a decline of 7% year over year. Legacy revenues accounted for $1,705 million, down 10% year over year. Data Integration revenues grossed $134 million, decreasing 18% year over year. Other services contributed the remaining $303 million flat year over year.

Operating Metrics

Quarterly operating expenses totaled $3,547 million, decreasing 6% year over year. Operating income decreased to $487 million from $593 million in second-quarter 2016. Operating income margin was 12.1% compared with 13.5% in the year-ago quarter. Adjusted EBITDA decreased to $1,397 million from $1,596 million in the year-ago quarter. Adjusted EBITDA margin was 36.2% compared with 36.4% in the year-ago quarter.

Cash Flow

In the third quarter of 2017, CenturyLink generated $958 million of net cash from operations compared with $911 million in the year-ago quarter. In the reported quarter, adjusted free cash flow was $109 million compared with $186 million in the year-ago quarter.

Liquidity

At the end of the reported quarter, CenturyLink had $160 million of cash and cash equivalents compared with $222 million at the end of December 2016. Total debt was $24,978 million compared with $18,185 million at the end of December 2016. The debt-to-capitalization ratio was 0.66 compared with 0.58 at the end of December 2016.

Segmental Results

Enterprise segment revenues declined 11.2% year over year to $2,171 million in the third quarter. Total expenses decreased from $1,452 million in the prior-year quarter to $1,292 million in the reported quarter. Segmental income was $879 million compared with $1,019 million in the year-ago quarter. Segmental income margin was 40.5% compared with 41.7% in the year-ago period

Consumer segment revenues were $1,387 million, reflecting a decline of 5.8% year over year. Total expenses declined from $643 million in third-quarter 2016 to $621 million in the third quarter of 2017. Segmental income was $766 million compared with $829 million in the prior-year quarter. Segmental income margin was 55.2% compared with 56.3% in the year-ago quarter.

Subscriber Statistics

As of Sep 30, 2017, total access lines were 10.506 million, down 6.5% year over year. High-speed broadband customer count was 5.767 million, down 3.1% year over year.

Q3 2017 Outlook

The company anticipates standalone CenturyLink full-year 2017 results to be below its guidance provided in February (adjusted for the Colocation Sale), primarily due to lower strategic revenue growth during the year and higher capital expenditures than originally anticipated. Additionally, CenturyLink has reiterated standalone Level 3 Communication Inc. full-year 2017 outlook.

Recent Development

In August 2017, CenturyLink also acquired cloud app management specialist, ElasticBox that will allow its customers to manage applications across 12 different cloud providers including the likes of Amazon.com Inc.’s AMZN Amazon Web Services, International Business Machines Corp.’s IBM IBM Softlayer, Microsoft Corp.’s MSFT Azure and Alphabet Inc.’s GOOGL Compute Engine.

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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