Wall Street Weighs In On CenturyLink's Earnings

Centurylink Inc CTL shares traded down 7% on Thursday after the company reported a mixed second quarter. CenturyLink reported EPS of 34 cents, beating analyst forecasts of 31 cents. However, revenue of $5.58 billion missed consensus expectations of $6.04 billion.

Revenue dropped 5.5% compared to a year ago, accelerating from the 5% drop CenturyLink reported in the first quarter. EBITDA was flat in the quarter, down from a 3.7% increase a quarter ago.

Several analysts have weighed in on how investors should approach the struggling stock following the report. Here’s a sampling of what they’ve had to say.

Voices From The Street

UBS analyst Batya Levi said CenturyLink’s legacy business continues to weigh on its numbers and will likely drag revenue down another 5% in the second half of the year.

“While mgmt. provided constructive commentary on demand for strategic services and new installs, voice rev (27% of mix falling at DD) and legacy data rev will continue to pressure revenues,” Levi wrote in a note.

Wells Fargo analyst Jennifer Fritzsche said CenturyLink’s outlook for the next two quarters is cautiously optimistic.

“With a 20%+ FCF and continued confidence in its FCF direction we continue to believe the risk/reward is compelling at current levels,” Fritzsche wrote.

Raymond James analyst Frank Louthan said in-line results, steady guidance and improvement on the integration issues that have plagued the company in the past are all positives for the stock.

“We still see the top line declines as a continuing issue that restricts value and there is risk that other names in the space (namely Frontier) could see restructuring issues that will impact the entire sector, but with a situation that could see more go right than can go wrong, we believe CenturyLink is no longer deserving of an Underperform rating,” Louthan wrote.

Ratings And Price Targets

• UBS has a Neutral rating and $11 target.
• Wells Fargo has an Outperform rating and $14 target.
• Raymond James has a Market Perform rating and no target.

The stock traded down 7.4% to $10.73 at time of publication.

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