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CenturyLink Plunges to a 52-Week Low: Should You Worry?

On Oct 2, shares of CenturyLink, Inc.CTL plunged to a 52-week low of $24.11 and eventually closed at $24.65. Moreover, year to date, the company's shares have lost nearly 38%.

CenturyLink reported dismal financial numbers in the second quarter of 2015, wherein both earnings and revenues lagged the Zacks Consensus Estimate. The company's second-quarter performance was largely affected by continued pressure on wholesale revenues along with higher employee and benefit costs.

Taking these factors into account, the company lowered its outlook for 2015. For 2015, the company expects operating revenues in the range of $17.7 billion to $17.9 billion, down from its previous estimate of $17.9-$18.1 billion. Moreover, adjusted earnings per share are projected between $2.35 and $2.55, lower than the company's previous estimate of $2.50 to $2.70. Also, CenturyLink is planning to retrench 1,000 employees following its disappointing second-quarter results.

Meanwhile, strength in products such as high-speed Internet, high bandwidth data services, Prism TV and managed hosting and cloud services remain key growth drivers for the company. In addition, a realigned business structure is likely to reap beneficial results over the long term.

However, CenturyLink's core local phone business has slowed significantly, which is evident from the consistent decline in access lines on an organic basis. As of Jun 30, 2015, total access line count stood at 12.109 million, down 4.7% year over year. 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 telecommunications providers, the company faces intense competition from cable TV operators and other wireless companies that aggressively offer traditional voice service on their networks.

Adding to the woes, federal regulations, labor issues, cash flow pressure and the constant need to upgrade technology to stay ahead of competitors are some of the potent risks prevailing.

Further, downward estimate revisions reflect pessimism regarding the stock's prospects. The Zacks Consensus Estimate for 2015 and 2016 moved south by 1.6% and 0.4% to $2.51 and $2.39 per share, respectively, over the last 60 days.

Currently, CenturyLink has a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in this sector include Harris Corporation HRS , Sprint Corporation S and T-Mobile US, Inc. TMUS . While Harris sports a Zacks Rank #1 (Strong Buy), both Sprint and T-Mobile US carry a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SPRINT CORP (S): Free Stock Analysis Report

HARRIS CORP (HRS): Free Stock Analysis Report

CENTURYLINK INC (CTL): Free Stock Analysis Report

T-MOBILE US INC (TMUS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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