Shares of tech solutions company Lumen Technologies (LUMN) jumped as much as 12.6% in trading on Wednesday after reporting fourth-quarter 2023 financial results. Shares were up 8.1% at 3:30 p.m. ET.
Down but not out
Quarterly revenue fell 7.4% to $3.5 billion, and net loss improved from $3.1 billion a year ago to $2 billion. But those two quarters included noncash goodwill impairment charges of $3.3 billion and $1.9 billion, respectively.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which is a proxy for the cash flow generated by the core business, was $1.1 billion for the quarter, and cash generated by operating activities was $784 million.
This was a big step toward management's multiyear strategic changes to turn the business into a growth engine by 2025.
In 2024, management expects adjusted EBITDA to be $4.1 billion to $4.3 billion, and free cash flow will be $100 million to $300 million. That would be a nice turnaround for the company long term.
The risk ahead for Lumen Technologies
Results are at least stumbling along what management thinks will be a low point. The challenge is there's $19.9 billion of long-term debt on the balance sheet that Lumen eventually needs to pay down or refinance. That's the ultimate risk for the company's turnaround plans.
I think results are a step in the right direction, but the risk/reward ratio is still very high, and that's what will keep me out of Lumen Technologies today. But it's certainly worth a spot on your watch list.
