) reported third quarter 2012 adjusted earnings of 66 cents per
share beating the Zacks Consensus Estimate of 59 cents and the
year-ago earnings of 61 cents.
Adjusted earnings per share exclude the impacts of special
items related to amortization of intangible assets, interest
expense, acquisition-related adjustments and changes in income
Quarterly revenues were $4,571 million, ahead of the Zacks
Consensus Estimate of $4,566 million. However, revenues fell from
the third quarter 2011 mark of $4,596 million due to the impact
of access line losses and lower access revenues, partially offset
by $58 million incremental revenues from the Savvis acquisition
completed and higher strategic revenues.
revenues declined 2.1% year over year to $2.5 billion in the
reported quarter. Slowdown in the legacy business was mainly
responsible for the decline. The segment registered Prism
TV subscriber growth over 10,000.
revenue was $908 million in the third quarter, down 7.6% year
over year, mainly attributable to lower switch access revenue as
most subscribers are substituting their fixed line services with
wireless and VoIP technology services. In addition,
implementation of the CAF (Connect America Fund) rate reduction
also contributed to the decline.
Enterprise Markets - Network
generated revenues of $658 million in the reported quarter, up
5.6% on a year-over-year basis. The growth was fueled by
high-bandwidth offerings and data integration revenues, partially
offset by declines in legacy services revenues.
Enterprise Markets - Data Hosting
revenue increased 8.1% year over year to $280 million, driven by
growth in managed hosting, cloud services, colocation alongside
financials and consumer solutions.
At the end of the third quarter, total access lines were 13.95
million compared with 14.8 million in the year-ago quarter.
CenturyLink added 44,000 high-speed Internet customers during the
reported quarter, thus bringing the total to 5.81 million (up
4.1% year over year).
CenturyLink exited the third quarter with $194 million of cash
and cash equivalents compared with $128 million at the end of
fiscal 2011. Long-term debt decreased to $19.5 billion from $21.4
billion at year-end 2011. The company generated free cash flow of
$905 million in the third quarter compared to $881 million in the
The company generated operating cash flow of $1.90 billion in
the third quarter compared with $1.88 billion in the year-ago
quarter, primarily due to lower personnel expenses and the Savvis
acquisition's contribution to operating cash flow, partially
offset by the decline in legacy revenues.
For the fourth quarter, the company expects earnings and
operating revenues in the range of $0.64 to $0.69 and $4.56 to
$4.61 billion, respectively. Operating cash flows are expected to
range between $1.90 billion and $1.94 billion.
For full year 2012, CenturyLink expects revenues in the range
of $18.35-$18.4 billion, slightly up from $18.30-$18.4 billion.
Adjusted EPS is expected in the range of $2.64 to $2.69, raised
from the previous guidance of $2.45-$2.55. Capital Expenditures
for the year have been increased to $2.75-$2.85 billion from the
previously expected range of $2.7-$2.8 billion. Free cash flow is
expected around $3.3-$3.4 billion compared to the previous
estimate of $3.25-$3.4 billion.
In the press release, the company also provided glimpses of
2013 earnings outlook. CenturyLink expects rate of revenue
decline for 2013 versus 2012 to be in the range of 0.5% -1.5%.
Further, operating and free cash flows are estimated to be lower
in 2013 given continued shift in its legacy and strategic revenue
mix and investment in key strategic initiative. In addition, the
company expects lower acquisition synergies compared to synergies
it expects to realize in 2012.
CenturyLink has successfully undertaken integration and
operation of the Embarq properties, mitigating the rate of access
line loss and meeting customer demand for high-speed Internet and
high-bandwidth services. We believe that the Qwest and Savvis
acquisitions will significantly enhance CenturyLink's position as
a global communications leader and strengthen its ability to
drive long-term shareholder value. However, significant
integration challenges as well as increased operating expenses
resulting from the acquisitions may impede operating performance
going forward. In addition, the company faces stiff competition
from its peers like
Leap Wireless International Inc.
We have a Zacks #3 Rank implying a short-term (1-3 months)
Hold rating on CenturyLink. For the long-term we have a Neutral
recommendation on the stock.
CENTURYLINK INC (CTL): Free Stock Analysis
LEAP WIRELESS (LEAP): Free Stock Analysis
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