Can CenturyLink (CTL) Pull a Surprise with Q1 Earnings? - Analyst Blog
Telecommunication service provider, CenturyLink, Inc. CTL, is slated to release its first-quarter 2015 financial numbers on May 5, after market close.
Last quarter, the company had delivered a negative earnings surprise of 4.76%. However, the company has outpaced the Zacks Consensus Estimate in the remaining three of the trailing four quarters, with an average earnings beat of 4.39%. Let’s see how things are shaping up for this announcement.
Factors Likely to Influence this Quarter
CenturyLink is currently pursuing acquisitions to boost its portfolio and enhance services. Recently, the company announced the acquisition of Orchestrate, a company that offers a completely managed database facility for the fast application development. We believe the Orchestrate buyout will boost CenturyLink’s cloud platform with fresh Database-as-a-Service (DBaaS) abilities.
Further, CenturyLink continues to expand its data centers. The company has recently opened a new data center in the Asia-Pacific region. Thus, the expansion of the public cloud platform to Singapore should allow the company to tap opportunities in the enterprise business and significantly promote its cloud products. Moreover, we believe that strength in products such as high-speed Internet, high bandwidth data services, and Prism TV remains a key growth driver for the company. In addition, a realigned business structure is likely to reap beneficial results in the coming quarters.
On the downside, deteriorating legacy voice and access revenues owing to wireless substitution, intense competition, federal regulations and labor issues might weigh on the quarter’s performance.
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 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at 59 cents.
Zacks Rank: CenturyLink has a Zacks Rank #3 which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
On the other hand, 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:
Intuit Inc. INTU, with an earnings ESP of +2.34% and a Zacks Rank #2.
Cogent Communications Holdings, Inc. CCOI, with an earnings ESP of +33.33% and a Zacks Rank #3.
Cincinnati Bell Inc. CBB, with an earnings ESP of +80.00% and a Zacks Rank #3.
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CENTURYLINK INC (CTL): Free Stock Analysis Report
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