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Lumen (LUMN) Beats Q4 Earnings Estimates, Misses on Revenues

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Zacks Equity Research
·4 min read
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Lumen Technologies, Inc. LUMN reported decent fourth-quarter 2020 results, wherein the bottom line beat the Zacks Consensus Estimate.

Bottom Line

Net loss in the December quarter was $2,289 million or a loss of $2.12 per share against net income of $223 million or 21 cents per share in the year-ago quarter. The deterioration primarily resulted from an operating loss.

In 2020, net loss was $1,232 million or a loss of $1.14 per share compared with net loss of $5,269 million or loss of $4.92 per share in 2019.

However, quarterly adjusted net income (excluding integration and transformation costs and special items) came in at $522 million or 48 cents per share compared with $352 million or 33 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 16 cents.

Lumen Technologies, Inc. Price, Consensus and EPS Surprise

Lumen Technologies, Inc. Price, Consensus and EPS Surprise
Lumen Technologies, Inc. Price, Consensus and EPS Surprise

Lumen Technologies, Inc. price-consensus-eps-surprise-chart | Lumen Technologies, Inc. Quote

Top Line

Quarterly total operating revenues slipped 3.4% year over year to $5,125 million. This was due to lower sales in the International and Global Accounts (IGAM), Small and Medium Business (SMB), Wholesale and Consumer business segments. The top line narrowly missed the consensus estimate of $5,126 million.

SMB revenues fell 7.1% year over year to $618 million due to a decline in legacy voice services. Revenues in Wholesale declined 6.2% to $922 million. Consumer revenues fell to $1,299 million from $1,354 million in the year-ago quarter. Revenues in IGAM declined 1.6% to $856 million. Enterprise revenues remained almost flat year over year at $1,430 million.

In 2020, revenues declined 3.5% year over year to $20,712 million.

Other Quarterly Details

Total operating expenses increased 55.5% year over year to $6,934 million, due to goodwill impairment of $2,642 million. Operating loss was $1,809 million against operating income of $847 million in the prior-year quarter.

Adjusted EBITDA slipped to $2,083 million from $2,105 million. The adjusted EBITDA margin was 40.6% compared with 39.7% in the year-ago quarter. Capital expenditures were $758 million compared with $940 million in the prior-year quarter.

Cash Flow & Liquidity

In 2020, Lumen generated $6,524 million of net cash from operations compared with $6,680 million in 2019. Free cash flow (excluding integration and transformation costs and special items) was $3,131 million compared with $3,276 million.

As of Dec 31, 2020, the company had $406 million in cash and cash equivalents with $29,410 million of long-term debt. This compares with the respective tallies of $1,690 million and $32,394 million a year ago.

2021 Outlook

For 2021, Lumen expects adjusted EBITDA in the range of $8.4-$8.6 billion. Adjusted free cash flow is projected between $2.8 billion and $3 billion. Capital expenditures are estimated between $3.5 billion and $3.8 billion. Depreciation and amortization are expected within the range of $4.2-$4.4 billion. The effective income tax rate is likely to be 27%.

Zacks Rank & Stocks to Consider

Lumen currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are Harsco HSC, Luna Innovations LUNA and Riot Blockchain RIOT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Harsco delivered a trailing four-quarter positive earnings surprise of 463.1%, on average.

Luna Innovations delivered a trailing four-quarter positive earnings surprise of 47.5%, on average.

Riot Blockchain delivered a trailing four-quarter positive earnings surprise of 3.4%, on average.

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