On Jan 8, shares of CenturyLink, Inc. CTL plunged to a 52-week low of $23.90 and eventually closed a little higher at $23.97. Moreover, the company’s shares lost nearly 38% over the past one year.
CenturyLink has restructured its operating segments to gain traction and boost revenues. Though the realignment is expected to deliver strategic revenue growth and operating efficiency over the long haul, it initially impacted sales in the first half of 2015.
Deteriorating legacy and data integration revenues and intensifying competition continue to hurt the stock. In third-quarter 2015, legacy and data integration revenues fell 5.9% to $1,673 million and 17.3% to $153 million, respectively, on a year-over-year basis.
Notably, 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 Sep 30, 2015, total access line count stood at 11.915 million, down 5% 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 0.4% and 2.1% to $2.56 and $2.35 per share, respectively, over the last 60 days.
Meanwhile, CenturyLink reported strong results in the third quarter of 2015, wherein both the top and the bottom line outpaced the Zacks Consensus Estimate. The quarterly performance was buoyed by higher revenues from the acceptance and recognition of CAF phase II funds in the quarter.
Currently, CenturyLink has a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in this sector include United States Cellular Corporation USM, Cogent Communications Holdings, Inc. CCOI and Windstream Holdings, Inc. WIN. While U.S. Cellular sports a Zacks Rank #1 (Strong Buy), both Cogent Communications and Windstream carry a Zacks Rank #2 (Buy).
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