Telecommunications service provider, CenturyLink, Inc. CTL, is slated to release its second-quarter 2015 financial numbers on Aug 5, after market close.
Last quarter, the company had delivered a positive earnings surprise of 13.56%. Moreover, the company has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average earnings beat of 5.73%. Let’s see how things are shaping up for this announcement.
Factors Likely to Influence this Quarter
For the second quarter of 2015, CenturyLink expects adjusted earnings per share of 59 cents to 64 cents on operating revenues of $4.41 billion to $4.46 billion.
Continuous extension of data centers, strength in products such as high-speed Internet, high bandwidth data services, and Prism TV remain as key growth drivers for the company. Specifically, expansion of Prism TV services should not only help the company counter higher churn rates but also drive revenues in the to-be-reported quarter. In addition, the Orchestrate buyout should further boost CenturyLink’s cloud platform with fresh Database-as-a-Service (DBaaS) abilities.
Notably, the small and mid-sized business (SMB) segment represents a massive growth opportunity for the company. 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 SMB locations.
Meanwhile, 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 may initially impact sales in the first half of 2015. Moreover, deteriorating legacy voice and access revenues owing to wireless substitution, intense competition, federal regulations and labor issues are some of the factors that may hamper profitability in the to-be-reported quarter.
Earnings Whispers
Our proven model does not conclusively show that CenturyLink is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below:
Zacks ESP: CenturyLink has an earnings ESP of -1.64%. This is because the Most Accurate estimate stands at 60 cents while the Zacks Consensus Estimate is pegged higher at 61 cents.
Zacks Rank: CenturyLink has a Zacks Rank #5 (Strong Sell). Note that, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may consider instead, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Ashford Hospitality Trust, Inc. AHT, which has an earnings ESP of +4.35% and a Zacks Rank #1.
Sprint Corp. S, which has an earnings ESP of +25.00% and a Zacks Rank #3.
The Walt Disney Company DIS, which has an earnings ESP of +2.16% and a Zacks Rank #3.
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