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Is a Beat in the Cards for CenturyLink's (CTL) Q1 Earnings?

Zacks Equity Research
·4-min read

CenturyLink, Inc. CTL is scheduled to report first-quarter 2020 results after the closing bell on May 6. In the last reported quarter, adjusted earnings matched the Zacks Consensus Estimate. In the first quarter, the company is likely to have generated lower consolidated revenues on a year-over-year basis due to volatility in demand amid the coronavirus pandemic.  

Factors at Play

During the first quarter, the company augmented its portfolio of voice and real-time communication services by launching CenturyLink Engage that delivers flexible cloud calling and provides customers with an optional online directory listing, customer relationship management integration and other add-on tools. The company also secured a task order, valued up to $1.6 billion, from the U.S. Department of the Interior to deliver managed core network with upgraded and secured cloud services.

In first-quarter 2020, CenturyLink teamed up with Microsoft Corp.’s cloud computing service, Azure, to be part of the Networking Managed Service Provider Program. The alliance is likely to reinforce CenturyLink’s commitment to edge computing services, fueled by increasing migration of enterprise workloads to multi-cloud networking environments with seamless and cost-effective cloud and hybrid networking solutions. The company further extended its year-long partnership with IBM and added the latter’s Cloud Direct Link services to its accretive portfolio of Cloud Connect Dynamic Connections in order to provide a secure and cost-effective platform to access dedicated private networks with ultra-low latency connections.

Despite its sustained focus on infrastructure development for improving revenue trajectory in the long term, CenturyLink is likely to report lower revenues for the first quarter. This is due to a tough year-over-year comparison, as the company faced challenging macroeconomic conditions in the quarter, triggered by the coronavirus pandemic. For the March quarter, the Zacks Consensus Estimate for total revenues stands at $5,484 million, implying a decline of 2.9% from the year-ago quarter’s reported figure. Adjusted earnings per share are pegged at 36 cents, indicating an improvement of 5.9% from the prior-year quarter’s reported figure, driven by cost-cutting initiatives and operational efficiencies through several methods, including network simplification and rationalization.

Earnings Whispers

Our proven model predicts an earnings beat for CenturyLink this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.41%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CenturyLink, Inc. Price and EPS Surprise

 

CenturyLink, Inc. Price and EPS Surprise
CenturyLink, Inc. Price and EPS Surprise

CenturyLink, Inc. price-eps-surprise | CenturyLink, Inc. Quote

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Zacks Rank: CenturyLink currently has a Zacks Rank #3.

Other Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Microchip Technology Incorporated MCHP has an Earnings ESP of +0.76% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Motorola Solutions, Inc. MSI is +2.56% and it carries a Zacks Rank of 3.

The Earnings ESP for Cisco Systems, Inc. CSCO is +0.72% and it carries a Zacks Rank of 3.

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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
 
CenturyLink, Inc. (CTL) : Free Stock Analysis Report
 
Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report
 
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
 
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Zacks Investment Research