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CenturyLink shares up on strong 3Q profit, outlook

NEW YORK (AP) -- Shares of CenturyLink Inc. rose Thursday after the phone company posted better-than-expected third-quarter net income and raised its profit guidance for the full year.

THE SPARK: The Monroe, La., company said that excluding one-time items it posted an adjusted profit of 38 cents per share. Revenue edged down less than 1 percent to $4.57 billion from $4.6 billion.

Analysts, on average, expected a profit of 58 cents per share on $4.57 billion in revenue, according to a FactSet poll.

For the fourth quarter, CenturyLink projected an adjusted profit of 64 to 69 cents per share on $4.56 billion to $4.61 billion in revenue. Analysts had been expecting 62 cents per share on $4.58 billion in revenue.

The company raised its full-year adjusted profit guidance to a range $2.62 to $2.69 per share from its previous $2.45 to $2.55 per share. It also narrowed its 2012 revenue projection to a range of $18.35 billion to $18.4 billion from its previous $18.3 billion to $18.4 billion.

Analysts were looking for full-year earnings of $2.53 per share on $18.38 billion.

THE BIG PICTURE: CenturyLink Inc. is using targeted investments in its key programs to boost revenue growth. It expects its revenue decline to slow in 2013 and stabilize the following year. But it warned that it expects operating and free cash flows to be lower in 2013, mainly as a result of the continued shift in its legacy and strategic revenue mix and investment in key initiatives.

THE ANALYSIS: Stifel Nicolaus analyst Christopher King backed his "Buy" rating for the company, saying that it continues to post strong results, with data-related revenue growth offsetting lower consumer demand for wired phone lines.

"CenturyLink continues to produce very consistent, solid operating results, with synergy achievements continuing to come in sooner than expected," King wrote in a note to investors.

Citi analyst Michael Rollins also backed his "Buy" rating and $46 price target for the company, pointing to its solid free cash flow and its slowing rate of revenue erosion.

THE SHARES: Up $2.26, or 6 percent, to $40.14 in heavy afternoon trading, after peaking at $40.49 earlier in the day. Over the past 52 weeks, the company's shares have traded between $34.81 and $43.43.