On Jun 1, 2015, we issued an updated research report on CenturyLink, Inc. CTL.
The company reported mixed financial numbers in the first quarter of 2015, wherein the bottom line surpassed the Zacks Consensus Estimate while the top line lagged the same.
CenturyLink restructured its operating segments to gain traction and boost revenues. Though the realignment may initially impact sales in the first half of 2015, it is expected to deliver strategic revenue growth and operating efficiency over the long haul. Moreover, the company, over the last few years, has been witnessing a lower rate of revenue decline.
Separately, CenturyLink is continuously expanding its data centers and has opened a new data center in the Asia-Pacific region recently. Notably, the company’s public cloud platform is available in nations like Germany, United Sates, United Kingdom and Canada. Also, in line with its expansion plans, CenturyLink has announced the opening of a data center in Singapore. We believe the new data centers will allow the company to tap on opportunities in the enterprise business and significantly promote its cloud products.
Recently, CenturyLink announced the availability of 1 Gbps (gigabit per second) fiber-to-the-premises (FTTP) connections in 17 states to provide symmetrical gigabit services to nearly 490,000 small and mid-sized businesses (SMB). The SMB segment represents a massive growth opportunity for the telecom industry. Significant improvement in business data and video traffic is expected to act as a catalyst for the industry. Several industry researchers predict that the SMB segment holds a long-term market opportunity worth $20–$30 billion.
On the downside, deteriorating legacy voice and access revenues owing to wireless substitution, cash flow pressure, federal regulations, labor issues and the constant need to upgrade technology are some of the major risks facing the company.
CenturyLink currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in this sector include Nippon Telegraph and Telephone Corporation NTT, Shenandoah Telecommunications Co. SHEN and TELUS Corporation TU. All these stocks hold a Zacks Rank #2 (Buy).
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