Why Did CenturyLink’s Revenue Surprise Wall Street in 4Q15?



CenturyLink’s revenue in 4Q15

Earlier, we learned that CenturyLink’s (CTL) earnings did beat Wall Street’s expectation significantly in 4Q15. The telecom company’s adjusted net income increased by a significant ~27.6% YoY (year-over-year) during the quarter. Now let’s look at the company’s revenue in 4Q15. CenturyLink’s revenue grew ~0.9% YoY to ~$4.5 billion during the quarter. The company’s revenue was ~1.4% more than the Wall Street analyst consensus for 4Q15.

As you can see in the above bar chart, CenturyLink’s revenue was below Wall Street analysts’ expectations in 2Q15, 1Q15, and 4Q14. However, earlier during 3Q15, the telecom player’s revenue was largely in line with Wall Street’s expectations.

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Consumer component continues to support CenturyLink’s revenue growth

During 4Q15, CenturyLink’s consumer and business components continued to be negatively affected by shrinking legacy services. The growth trend in CenturyLink’s revenue from the consumer component continued in 4Q15. This revenue stream increased ~1.3% YoY to ~$1.5 billion in 4Q15. Earlier in 3Q15, this component’s revenue grew ~1.2% YoY.

The revenue for CenturyLink’s Business segment, the larger portion of the company’s revenue, continued to contract YoY, although at a slower rate in 4Q15. The component’s revenue declined ~1.6% YoY to ~$2.7 billion during the quarter. In 3Q15, this component’s revenue decreased by ~4.9% YoY.

For a diversified exposure to telecom companies in the United States, you may consider investing in the iShares Russell 1000 Value ETF (IWD). The ETF held a total of ~2.5% in some of the US telecom players at the end of December 2015. Note that AT&T (T), CenturyLink, Level 3 Communications (LVLT), and Verizon (VZ) made up ~2.2% of the ETF at the end of 2015.


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