CenturyLink declines after lowering its outlook

CenturyLink skids after lowering revenue estimate for 2013 and forecasting decline in 2014

Associated Press

NEW YORK (AP) -- Shares of CenturyLink Inc. slumped Thursday after the telecommunications company lowered its revenue forecast for the full year, saying it expects slower growth from some of its businesses.

THE SPARK: CenturyLink said Wednesday it now expects $18.05 billion to $18.2 billion in revenue this year, down from its previous estimate of $18.1 billion to $18.3 billion. The company said its revenue from its Internet, private network and data transmission businesses should improve in the second half of the year, but growth will be slightly lower than it originally expected. It also reported a small decline in broadband subscribers during the quarter.

CenturyLink narrowed its annual earnings outlook to $2.63 to $2.73 per share excluding one-time items.

Analysts forecast $2.74 per share and $18.12 billion in revenue, according to FactSet.

THE BIG PICTURE: The Monroe, La., company said revenue from low-bandwidth services is lower than expected and data hosting revenue is not growing as quickly as it anticipated. CenturyLink said its revenue will probably decline by a small amount in 2014. It had been targeting stable revenue in 2014.

On average, analysts expect the company to report $18.06 billion in revenue in 2014.

CenturyLink said it earned 69 cents per share in the second quarter if one-time items are excluded, and its revenue fell 2 percent to $4.53 billion. Revenue from CenturyLink's "strategic" division, which includes Internet, private networks and data transmission, rose 4 percent to $2.16 billion. Revenue in the division housing its traditional phone, data and network service fell 7 percent to $1.95 billion.

Analysts were expecting net income of 67 cents per share and $4.53 billion in revenue, according to FactSet.

THE ANALYSIS: Citi Investment Research analyst Michael Rollins said he's surprised the company lowered its revenue outlook after raising it three months ago. He said the company may need to make further investments in its operations and make new acquisitions to bolster its revenue. Rollins kept a "Neutral" rating on the stock and lowered his price target to $37 per share from $39.

SHARE ACTION: CenturyLink shares fell $1.79, or 4.9 percent, to $34.60 in afternoon trading. The stock has lost 12.7 percent of its value since CenturyLink reported its fourth-quarter results on Feb. 13.

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