, we issued an updated research report on
The company's top line duly surpassed the Zacks Consensus
Estimate and increased year over year in the first quarter of 2014.
On the other hand, while earnings surpassed expectations, they
significantly deteriorated from the year-ago quarter number.
Currently, the Zacks Consensus Estimate for second quarter earnings
is pegged at 64 cents per share, representing an annualized decline
CenturyLink redesigned its operating segments to strengthen its
grip over the market and remain fully committed to wholesale,
consumer and hosting customers. The company, over the last few
years, has been witnessing a slow rate of revenue decline.In 2013,
the company's core revenue trend recorded a narrower decline of
1.3% compared to 2.3% in 2012. In 2014, the company expects this
trend to continue, arresting core revenue decline from a negative
1.2% to flat, buoyed by strategic revenues, improvement in
broadband and Prism TV sales as well as high bandwidth data and
hosting services. For the second quarter, the company projects
total operating revenue in the range of $4.48-$4.53 billion and
core revenues in the $4.07-$4.12 billion band.
CenturyLink is expected to achieve this target on synergies from
long-standing ties with clients, bundled integrated services,
launch of new and attractive services, consistent technology
upgrades, infrastructure enhancement, better usage of networks and
profitable collaborations. The company is also benefiting from its
continuous investments in Product portfolio, which places it as an
integrated end-to-end solution provider to various businesses.
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 remains committed to its ambition of
making Prism TV service (catering to 200,000 customers at present)
available to several new markets and adding 300,000 subscribers in
On the flip side, CenturyLink's core local phone business has
dwindled significantly, which is evident from the consistent
decline in access lines on an organic basis. This is primarily due
to the rapid 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 faces intense competition from cable TV
operators and other wireless companies which aggressively offer
traditional voice service over their networks. Improvements in the
quality of VoIP (Voice over IP) services have enabled cable TV,
Internet and telephone companies to offer services at attractive
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), which represents an important source of its network
access revenues. The Federal Communications Commission (FCC) has
reformed its USF and intercarrier compensation (fees that carriers
pay each other when they connect telephone calls) rules. It has
also 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
CenturyLink currently has a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Better ranked stocks in this sector include
RF Micro Devices Inc.
Ruckus Wireless, Inc.
). While Inteliquent and RF Micro Devices sport a Zacks Rank #1
(Strong Buy), Ruckus Wireless has a Zacks Rank #2 (Buy).
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CENTURYLINK INC (CTL): Free Stock Analysis
RF MICRO DEVICE (RFMD): Free Stock Analysis
INTELIQUENT INC (IQNT): Free Stock Analysis
RUCKUS WIRELESS (RKUS): Free Stock Analysis
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