CenturyLink Up, Windstream Down Following Earnings

August 10th, 2012 by · 9 Comments

CenturyLink (NYSE:CTL, news, filings) and Windstream (NYSE:WIN, news, filings) each reported earnings this week. The two former primarily rural ILECs have each been evolving toward business services and the cloud, but for Q2 it was CenturyLink the market was happy with while Windstream took a hit.

CenturyLink turned in earnings per share of $0.65 excluding special items on revenues of $4.61B, both being slightly higher than composite analyst projections. They saw access line losses slow to 6.1% and a sequential boost to colo and managed hosting revenues of 5.8%. They also raised full year projections slightly to earnings of $2.45-2.55 per share and $18.3-18.4B in revenue. Operationally, they added fiber to 1,350 towers during the quarter for a total of 12,150 and another 2,000-3,000 on tap for the remainder of the year.

Meanwhile, Windstream met overall expectations with revenues of $1.54B and earnings per share of $0.12 after integration and restructuring costs. However, business services declined slightly sequentially to $893M, while wholesale revenues dipped to $214M due to the suspension of some PAETEC products. The PAETEC integration seems on-track, but at an earlier stage than with CenturyLink/Qwest/Savvis of course.  It’s just two quarters since the deal closed, and the PAETEC business wasn’t growing much organically must surely churn slightly at first.  I’m not sure what the ever-impatient market was expecting, but Windstream’s transformation to a national ILEC/CLEC hybrid is necessarily going to take a while longer to truly bear fruit.

More on this topic (What's this?) Read more on Windstream at Wikinvest
Categories: Cloud Computing · Datacenter · Financials · ILECs, PTTs

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9 Comments So Far


  • Anonymous says:

    are you hearing anything about these two companies getting hitched?

  • Anon says:

    Rob, not sure i see the upside in the CTL quarter. The core business is shrinking – line loss is par for this course — but regarldess of what they do, they will see (not so slow) revenue loss. Savvis, which was acquired for growth, is lagging the entire hosting/colo industry at 6% y/y (compare with EQIX and others). How do you create value paying 11x for a company that grows at half that rate?

    Overall, the company appears to have as much Goodwill on the balance sheet as PP&E. The company has $21 Billion in debt and No Tangible Assets. ROA and ROE are 2-3% (below cost of capital). Individually, Century, Embarq, Qwest, Savvis and CIBER were tough businesses — why are they better off together ?

    This formula, in the past, has signaled a broken telco roll up. As of now, they can manage EPS with network groom and M&A. But then what? Why is this one different than the others?

    • Anon says:

      Updating this post with the hope someone will reply. How is Century going to escape lines loss, low or no growth at savvis and upside down balance sheet issues. My opinion is that this is the biggest missed story in telecom today…

      Haggle over the special access stuff alone, in a dark room (no one cares – government mandates over legacy tech). Let’s ramble about telecoms…

      • Profile photo of Rob Powell Rob Powell says:

        There is no ‘escape’ from revenue declines from a mature product in this business, you manage it for cash flow and then use the cash flow to invest in stuff that does grow. For incumbents, revenue levels are less important than maintaining cash flow and earnings by keeping the product mix viable.

        I wasn’t saying CenturyLink is succeeding at this yet, just that for Q2 they did a bit better at this than expected so the market was happy for the moment. There remain big challenges ahead, as you suggest.

        Clearly they need to do much better with the Savvis assets than Savvis itself was doing, else they’ll have overpaid big time. It’s a bit early to be sure about how that will turn out, as we’re not yet near widespread adoption of cloud-based services.

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