uploads///Telecom CenturyLinks Revenue

Why Did CenturyLink’s 1Q16 Revenue Surprise Wall Street?


May. 10 2016, Published 12:59 p.m. ET

CenturyLink’s revenue in 1Q16

In 1Q16, CenturyLink’s (CTL) earnings beat Wall Street’s expectations for the third quarter in a row. The company’s adjusted net income increased by ~2.9% YoY (year-over-year) during the quarter. Let’s look now at the company’s revenue in 1Q16.

CenturyLink’s revenue declined ~1.1% YoY to ~$4.4 billion for the quarter. For 2Q16, the company expects to generate revenue of $4.38 billion–$4.43 billion. Note that earlier in 2Q15, the company’s revenue was ~$4.42 billion.

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Consensus versus actual performance

The company’s revenue was ~0.6% less than Wall Street analysts’ consensus for 1Q16. As we can see in the above graph, CenturyLink’s revenue came in above expectations in 4Q15. In 3Q15, the revenue figure was mostly in line with Wall Street expectations. However, in 2Q15 and 1Q15, this metric negatively surprised Wall Street analysts.

Consumer Components’ revenue turned red in 1Q16

In 1Q16, CenturyLink’s Business and Consumer Components segments continued to be adversely impacted by shrinking legacy services. The growth trend for revenue from Consumer Components reversed in 1Q16, decreasing ~0.5% YoY to ~$1.5 billion in 1Q16.

Revenue for the Business segment, the company’s largest revenue contributor, continued to shrink YoY in 1Q16. This revenue stream declined ~3.4% YoY to ~$2.6 billion in the quarter.

Instead of taking direct exposure to the stocks of players in the US telecom industry, you can consider a diversified exposure by investing in the SPDR S&P 500 ETF (SPY). SPY held a total of ~2.7% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of April 2016.

Next, let’s look at the dynamics of CenturyLink’s core revenue in 1Q16.


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