Will CenturyLink Stock Rally More on $1.6 Billion IT Order?

On Thursday, CenturyLink (NYSE:CTL) stock ended the trading day at $13.56—a rise of 3.83%. The stock is trading 15.6% lower than its 52-week high of $16.06. Also, the stock was 40.7% higher than its 52-week low of $9.64. The stock’s market cap is $14.8 billion as of Thursday. In the last 12 months, the stock fell by about 15.2%. Also, CenturyLink stock rose by about 1.4% in pre-market trading today.

Yesterday, CenturyLink stock rose after it won a $1.6 billion order. The Department of the Interior selected CenturyLink to provide core networking and managed security services. The task order was granted by the government’s Enterprise Infrastructure Solutions program.

According to a LightReading report on Thursday, “The Department of the Interior selected CenturyLink to deliver secure, modern network services that will help the agency achieve its mission to conserve and manage our nation’s natural resources and cultural heritage for the benefit and enjoyment of the American people.” The report also said, “This award from DOI shows that government agencies are increasingly turning to CenturyLink as their trusted provider to help them with their IT modernization efforts so they can focus on their mission.”

CenturyLink offers senior secured notes

In a press release today, CenturyLink announced that it agreed to sell $1.25 billion of its newly-issued 4.0% senior secured notes due in 2027 in a private offering. The company will use the total net proceeds from selling the notes for activities like paying down its outstanding debt.

CenturyLink’s Q4 earnings report

Wall Street analysts expect CenturyLink to post sales of $5.5 billion in the fourth quarter—a fall of 4.1% YoY (year-over-year) compared to $5.8 billion in the fourth quarter of 2018. Also, analysts expect the company’s adjusted EPS to fall by 10.8% YoY to $0.33 in the fourth quarter.

Analysts expect CenturyLink’s adjusted EPS to rise 10.9% YoY to $1.32 in 2019, 10.6% YoY to $1.46 in 2020, and 4.1% YoY to $1.52 in 2021. Analysts also expect the company’s net sales to fall 4.5% YoY to $22.4 billion in 2019 and 2.9% YoY to $21.7 billion in 2020. The company’s sales will likely fall by 2.6% to $21.2 billion in 2021.

Analysts’ recommendations and target price

According to data compiled by Thomson Reuters, 15 analysts cover CenturyLink stock. About 13.3% have a “buy” rating, 66.7% have a “hold” rating, and 20% have a “sell” rating.

The average target price is $13.02, which implies a downside of about 4.0% based on the stock’s last closing price of $13.56. The target prices for CenturyLink stock vary. The highest target price is $16, while the lowest target price is $10.

Stock’s valuation

Currently, CenturyLink stock is trading at 9.30x its fiscal 2020 estimated non-GAAP EPS of $1.32. The stock is also trading at 8.94x its fiscal 2021 estimated non-GAAP EPS of $1.46. Analysts expect CenturyLink’s earnings to rise at a compound annual growth rate of 7.4% in the next five years.

Technical analysis

Based on the closing price yesterday, the stock was trading 3.3% above its 20-day moving average of $13.13. The stock is also trading 2.3% below its 50-day moving average of $13.88 and 3.4% above its 100-day moving average of $13.12.

CenturyLink’s 14-day RSI (relative strength index) score is 55. The score shows that the stock isn’t overbought or oversold. CenturyLink’s upper, middle, and lower Bollinger Band levels are $13.54, $13.10, and $12.67, respectively. On Thursday, the stock closed near its upper Bollinger Band level, which indicated that it was overbought.

Yesterday, CenturyLink stock’s short-interest ratio or short interest as a percentage of float was about 9.69%. When a stock’s short-interest ratio is more than 40%, it suggests that traders and investors expect the stock’s price to fall.

On Thursday, CenturyLink’s dividend yield was 7.37%. Read A Look at CenturyLink’s Dividend Yield and Outlook and How CenturyLink Stock Wrapped Up 2019 to learn more.