On Mar 14, 2014, we issued an updated research report on
). The company posted mixed results in fourth quarter 2014. While
earnings missed the Zacks Consensus Estimate, revenues were ahead
of our expectations.
The Zacks Consensus Estimate for CenturyLink's first-quarter
earnings is pegged at 61 cents, representing a decline of 19.38%
on an annualised basis
CenturyLink redesigned its operating segments to strengthen
its grip over the market as well as remain fully committed to
wholesale, consumer and hosting customers. The company, over the
last few years, has been witnessing a slower rate of revenue
In 2013, the company's core revenue trend continued to improve
from a 2.3% annual decline in 2012 to 1.3%. For 2014, the company
expects this trend to continue improving core revenues from -1.2%
to flat buoyed by strategic revenues, growth in broadband and
Prism TV as well as high bandwidth data services and hosting
The primary factors contributing to this include long-standing
ties with clients by bundling integrated services, launch of new
and attractive services, consistent technology upgrades,
infrastructure enhancement, better usage of networks and
profitable collaborations. CenturyLink is also benefiting from
its continuous investments in Product portfolio, which places it
as an integrated end-to-end solution provider to various
Centurylink's Prism TV service is performing well and is
expected to compensate for the revenue loss due to reduction of
single play voice customers. CenturyLink also remains committed
to take Prism TV service (available to 69,000 customers) to
additional markets and add subscribers.
However, the company continues to experience a decline in
subsidy payments received under the Federal Universal Service
Fund or USF (provides telecom funding for lower income and rural
consumer coverage), representing an important source of its
network access revenue. The FCC had reformed its USF and
intercarrier compensation (fees that carriers pay each other when
they connect telephone calls) rules.
The FCC highlighted its efforts to expand high-speed Internet
services to rural areas over the next six years (2012-2018). It
will reduce access and compensation rates charged by CenturyLink
over the next six years, resulting in significant decline in the
company's access revenues.
CenturyLink's core local phone business has slowed
significantly, which is evident from the consistent decline in
access lines on an organic basis. This is primarily 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 telecommunication providers
Verizon Communications Inc.
), the company faces intense competition from cable TV operators
and other wireless companies which aggressively offer traditional
voice service over their networks. Improvement in the quality of
VoIP services has enabled cable TV, Internet, and telephone
companies to offer services at attractive price points.
CenturyLink currently has a Zacks Rank #3 (Hold)
Stocks That Warrant a Look
A better-ranked stock in this sector includes
), which has a Zacks Rank #2 (Buy).
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