Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is CenturyLink Stronger Than Windstream and Frontier?

CenturyLink (NYSE: CTL  ) will release its quarterly report on Wednesday, and shareholders haven't seen much of a recovery ever since the telecom cut its dividend earlier this year. Yet even though many put the high-yielding stock in the same category as rural telecoms Windstream (NASDAQ: WIN  ) and Frontier Communications (NASDAQ: FTR  ) , CenturyLink arguably had different motives for slashing its payout, and as a result of the move, CenturyLink might be healthier than its rivals.

The biggest challenge that CenturyLink, Windstream, and Frontier have faced is holding onto customers in their traditional landline voice offerings. In general, as telecoms have lost their voice customers to wireless phones, they've had to try to make up lost revenue through offering Internet broadband and video products instead. Yet the competition for those products is a lot fiercer. Can CenturyLink do better than Windstream and Frontier in holding onto its legacy customers? Let's take an early look at what's been happening with CenturyLink over the past quarter and what we're likely to see in its report.

Stats on CenturyLink

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$4.51 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Did CenturyLink make the right move by cutting its dividend?
Analysts in recent months have cut back on their views on CenturyLink earnings, reducing their third-quarter estimates by $0.03 per share and their full-year 2014 projections by double that amount. The stock has followed those estimates down, falling 5% since early August.

CenturyLink didn't get off to a good start to the quarter. Although its second-quarter net income more than tripled, sales fell 2%. Even worse, CenturyLink gave negative guidance for the remainder of the current year, cutting both its expected range of earnings per share and its full-year sales. The poor results justify the company's move to cut its dividend, and they're also consistent with the pressures that Windstream and Frontier have felt recently. All three companies are struggling to find growth even in a declining landline market.

Yet CenturyLink has some things going for it that Windstream and Frontier don't. Frontier has already cut its dividend twice, yet its payout ratio remains uncomfortably high, leading some to believe further dividend cuts are imminent. Meanwhile, Windstream has stubbornly held its dividend unchanged for years, but its 12% yield looks increasingly unsustainable. Yet CenturyLink has taken the money it saved from its dividend cut to implement share repurchases that have led to falling share counts. Moreover, CenturyLink has done a better job than Frontier and Windstream at retaining voice customers while also boosting broadband and video subscriber counts.

Still, things aren't easy for CenturyLink. As if the company didn't already face enough competitive pressure from traditional telecom rivals, CenturyLink is now seeing further competition from technology companies. Google (NASDAQ: GOOGL  ) chose Provo, Utah, as one of its sites to provide Google Fiber broadband service, even over CenturyLink's objections about Google's having acquired a local city-owned fiber-optic network in order to move forward with the project.

In the CenturyLink earnings report, watch to see how well the company does with its cloud-computing infrastructure business. With more exposure to higher-growth areas than Windstream or Frontier, CenturyLink has the ability to gain ground even if its rivals continue to falter.

Going beyond landlines
The biggest threat to CenturyLink came from the smartphone. But now, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Click here to add CenturyLink to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2712768, ~/Articles/ArticleHandler.aspx, 9/26/2016 12:09:15 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,106.61 -154.84 -0.85%
S&P 500 2,149.83 -14.86 -0.69%
NASD 5,262.76 -42.99 -0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 11:54 AM
CTL $27.33 Down -0.09 -0.33%
CenturyLink CAPS Rating: **
FTR $4.36 Up +0.03 +0.58%
Frontier Communica… CAPS Rating: ***
WIN $10.19 Up +0.26 +2.66%
Windstream CAPS Rating: **
GOOGL $801.95 Down -13.01 -1.60%
Alphabet (A shares… CAPS Rating: *****