CenturyLink 1Q Earnings Beat Ests - Analyst Blog
May 09 2013 - 4:13AM
Zacks
CenturyLink Inc. (CTL) reported mixed first
quarter 2013 results, owing to well performing broadband, Prism TV
and data hosting units supported by growing demand from customers
and low operating expenses. These were partially offset by access
line losses and dull legacy services.
The company posted quarterly adjusted earnings of 76 cents per
share, beating the Zacks Consensus Estimate of 69 cents. Comparing
with the prior-year quarter, the results improved 11.8% from 68
cents.
Quarterly revenues of $4,513 million failed to meet the Zacks
Consensus Estimate of $4,524 million. However, revenues fell from
the first quarter 2012 mark of $4,610 million.
Segment Results
Effective first quarter, CenturyLink restructured its operating
segments into four reporting units – Consumer, Business, Wholesale
and Data Hosting services.
Consumer revenues declined 3.4% year over
year to $1,511 million in the reported quarter. Slowdown in the
legacy business was mainly responsible for the decline. The segment
registered Prism TV subscriber growth of over 13,400.
Business revenue was $1,504 million in
the first quarter, almost unchanged from the prior-year quarter
figure. The company’s strength in high-bandwidth offerings was
weakened by a drop in legacy services and data integration
revenues.
Wholesale segment generated revenues of
$907 million in the reported quarter, down 5.7% on a year-over-year
basis. The plunge was fueled by the introduction of reduced access
rates. The company completed over 800 fiber builds in the quarter
and is on track to cover 4,000 to 5,000 fiber builds throughout the
year.
Data Hosting revenue increased 7.7% year
over year to $334 million, driven by growth in managed hosting
along with colocation services.
Subscribers
At the end of first quarter, total access lines were 13.558 million
compared with 14.379 million in the year-earlier period.
CenturyLink added nearly 66,700 high-speed Internet customers
during the quarter, thus bringing the total to 5.915 million (up
2.9% year over year).
Liquidity
CenturyLink exited the quarter with $476 million of cash and cash
equivalents compared with $211 million at the end of 2012.
Long-term debt increased to $19,595 million from $19,400 million at
year-end 2012. The company generated operating cash flow of $1,397
million in the quarter, while free cash flow was $1,006
million.
As of May 7, the company bought back 19.2 million shares for $682
million under the authorized new share repurchase program.
Guidance
For the second quarter of 2013, the company expects earnings and
operating revenues in the range of 63 cents to 68 cents and $4.49
billion to $4.54 billion, respectively. Operating cash flows are
expected to range between $1.82 billion and $1.86 billion.
For full-year 2013, CenturyLink expects revenues in the range of
$18.1-$18.3 billion, reflecting a drop of 0.5% to 1.5% from the
last year. Adjusted EPS is expected in the range of $2.60 to $2.75.
Operating cash flows will likely be in range of $7.35 billion to
$7.55 billion, while capital expenditure is expected to be about
$2.8 billion to $3.0 billion.
Our Analysis
CenturyLink – which has business tie-ups with Verzion
Communications Inc. (VZ) – has a Zacks Rank #3, implying a
Hold rating.
With a reformed operating base, we expect the company to perform
impressively in the coming months backed by broadband expansion,
completion of fiber builds, better cloud computing services and
launch of Prism TV in new markets.
However, stiff competition from other low-cost telecom operators
like LEAP Wireless International Inc. (LEAP) and
Clearwire Corp. (CLWR), regulatory issues coupled
with the constant need for technology upgrades may impede the
company’s operating performance going forward.
CLEARWIRE CORP (CLWR): Free Stock Analysis Report
CENTURYLINK INC (CTL): Free Stock Analysis Report
LEAP WIRELESS (LEAP): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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