Investors have been none too happy with CenturyLink (LUMN 0.76%) this year. Shares are down 27% year to date, with that fall fueled by the mid-February announcement that the company would be more than halving the dividend. Meanwhile, revenue has continued its slow move in the wrong direction.

Yet there's hope, as second-quarter revenue notched only a small drop from the previous quarter and the company is getting ready to make some infrastructure investments that could pay off down the road. The stock certainly isn't for those who don't like risk, but some reasons for cautious optimism might be emerging.

The top and bottom lines are moving in opposite directions

Revenue in the second quarter of 2019 fell 5.5% year over year as sales across all of CenturyLink's segments declined save for in the international and global accounts segment, where revenue was flat. A drag from legacy services like landline phones and slow internet connection services were blamed as the main culprit. However, from Q1 to Q2, management pointed out that revenues fell only 1%. While a year-over-year comparison is usually a more accurate one, the service fee business model is fairly consistent, so the sequential improvement in the declining top line could mean CenturyLink is about to turn some sort of corner.

Then again, maybe it isn't, as CenturyLink left its full-year guidance unchanged. However, shareholders can take solace in the fact that the company does continue to squeeze cash out of its takeover of former peer Level 3 Communications. Even though revenue keep falling, the bottom line is on the rise. Adjusted earnings (which back out an impairment charge taken in the first quarter) increased 31%, and free cash flow (basic profitability after operating and capital expenditures are paid for) grew 11%.

All told, the first half of 2019 could have been worse. Though the sales picture keeps any feel-good vibe in check, CenturyLink is cutting costs and making the most of its connectivity services.


Six Months Ended June 30, 2019

Six Months Ended June 30, 2018

Change (YOY)


$11.2 billion

$11.8 billion


Cost of services and products

$4.97 billion

$5.53 billion


SG&A expenses

$1.89 billion

$2.22 billion


Capital expenditures

$1.73 billion

$1.58 billion


Adjusted earnings per share




SG&A = selling, general, and administrative. Data source: CenturyLink. YOY = year over year. 

Some much-needed upgrades on the way

CenturyLink CFO Neel Dev said the top line is in decline as CenturyLink focuses on "adding profitable revenue and de-emphasizing unprofitable lines of businesses." However, without specifics on what those profitable lines of revenue are and how much they're growing, investors have a hard time telling what the future holds.  

Artist's rendering of a cloud connected to several laptop computers.

Image source: Getty Images.

An assessment of the company's flagging consumer business is still underway, potentially paving the way to its eventual sale. That could help shore up the balance sheet (there's still $33.2 billion in long-term debt on the books) and give CenturyLink some maneuverability to invest in new services.

Speaking of which, CenturyLink announced it will be making investments in edge computing -- basically small regional data centers located closer to the customer to enable faster response times. The new infrastructure will include over 100 new edge computing centers across the U.S.

The investment will help CenturyLink extend its fiber-optic network and build on its other next-gen enterprise solutions like cloud computing. It's ultimately good news and a move in the right direction if there's any hope for the communications company to recapture growth. With those edge centers not yet complete and the consumer business still struggling, though, expect more of the same top-line decline but bottom-line improvement at CenturyLink for the rest of the year.