Lumen (LUMN) Q1 Earnings Miss Estimates, Revenues Down Y/Y
Lumen Technologies, Inc LUMN reported adjusted earnings (excluding special items) of 10 cents per share for first-quarter 2023 compared with 63 cents per share in the prior-year quarter. The bottom line missed the Zacks Consensus Estimate of 12 cents.
Quarterly total revenues were $3,738 million, down 20% year over year on a reported basis and declining 2% on a sequential basis. The Zacks Consensus Estimate is pegged at $3,717 million. Revenues in the first quarter were significantly impacted due to the completion of the sale of its Latin America business and its 20-state ILEC business to Apollo.
For the first quarter of 2023, the company's post-closing revenue impact from the actual amount received under the post-closing agreements with the buyers of the divested businesses was $28 million.
Following the announcement, shares are up 4.7% in premarket trading on May 3.
Lumen Technologies, Inc. Price, Consensus and EPS Surprise
Lumen Technologies, Inc. price-consensus-eps-surprise-chart | Lumen Technologies, Inc. Quote
Segment Performance
Lumen has adopted a new reporting structure under which it has collapsed International and Global Accounts or IGAM and large enterprise into the large enterprise channel. The company has moved the public sector to its own separate channel.
By segment, Business’ revenues fell 13% to $2,956 million, affected by the sale of the correctional facilities business. Revenues from Large Enterprise fell 17% to $1,194 million.
Mid-Market Enterprise’s revenues fell 10% to $515 million. Public Sector’s revenues were down 10% to $430 million. Total Enterprise Channels’ revenues were down 14% to $2,139 million.
Revenues in Wholesale fell 10% to $817 million. Revenues from Mass Markets declined 39% year over year to $782 million.
Lumen anticipates witnessing healthy momentum in the Quantum business in the upcoming quarters. The company added 24,000 Quantum fiber subscribers, taking the count to 856,000 in the reported quarter.
In the first quarter, total enablements were approximately 120,000. As of Mar 31, 2023, the total enabled locations in the retained states stood at 3.3 million. The company is targeting to exceed 500,000 enabled locations in 2023.
Other Quarterly Details
Total operating expenses decreased 7% year over year to $3,348 billion.
Operating income was $390 million compared with $1,083 million reported in the prior-year quarter. Adjusted EBITDA (excluding special items) slipped to $1.251 billion from $1.966 billion for respective margins of 33.5% and 42%, owing to the negative impact of divestiture-related commercial agreements.
Cash Flow & Liquidity
In the first quarter, Lumen generated $595 million of net cash from operations compared with $1,375 million a year ago.
Free cash outflow (excluding cash special items) for the year was $75 million compared with free cash flow of $846 million in the year-ago quarter.
As of Mar 31, 2023, the company had $1,148 million in cash and cash equivalents with $19,743 million of long-term debt compared with the respective figures of $1,251 million and $20,418 million as of Dec 31, 2022.
2023 View
For 2023, Lumen expects adjusted EBITDA in the range of $4.6-$4.8 billion. Free cash flow is projected to be between breakeven and $200 million.
Capital expenditures are estimated between $2.9 billion and $3.1 billion. The effective income tax rate for the full year is estimated to be nearly 26%.
Zacks Rank & Stocks to Consider
Lumen currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology space are Arista Networks ANET, Badger Meter BMI and Enfusion ENFN. Badger Meter and Enfusion currently sport a Zacks Rank #1 (Strong Buy), whereas Arista Networks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Arista Networks’ 2023 earnings has increased 1.2% in the past 60 days to $5.83 per share. The long-term earnings growth rate is anticipated to be 14.2%.
Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 14.2%. Shares of ANET have increased 29% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 4.7% in the past 60 days to $2.69 per share.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have increased 122.4% in the past year.
The Zacks Consensus Estimate for Enfusion’s 2023 earnings has increased 5.6% in the past 60 days to 19 cents per share.
Enfusion’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 6.7%. Shares of the company have increased 3.2% in the past year.
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