Lumen (LUMN +3.11%) stock got hit with a substantial valuation pullback in February. The company's share price declined 19.4% in a month that saw the S&P 500 decline 0.9% and the Nasdaq Composite fall 3.4%.
Lumen's valuation saw a decline in conjunction with the publication of the company's fourth-quarter results and selling pressures impacting the broader artificial intelligence (AI) space. On the other hand, the stock did see some valuation recovery following its investor-day conference.
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Lumen stock sank after earnings
Lumen published its fourth-quarter results after the market closed on Feb. 3, posting earnings that were far better than Wall Street's target and sales that were roughly in line with expectations. The business reported non-GAAP (adjusted) earnings per share of $0.23 on sales of $3.04 billion. For comparison, the average analyst estimate had called for an adjusted loss of $0.27 per share. Despite the big earnings beat, investors focused more on the sales picture following the report. Revenue was down 8.7% year over year,
For 2026, Lumen is guiding for free cash flow to come in between $1.2 billion and $1.4 billion and for capital expenditures to be between $3.2 billion and $3.4 billion. Meanwhile, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are projected to be between $3.1 billion and $3.3 billion.
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Key Data Points
Following its Q4 report, Lumen hosted an investor-day conference on Feb. 25 and laid out some longer-term growth targets. Management expects that the business's adjusted EBITDA margin will have increased from 27.1% last year to a mid-30% range and said that the business is repositioning to deliver reliable growth for earnings and free cash flow. The company also announced that it had $13 billion in private-connectivity-fabric deals and had won a contract with Anthropic to help the AI software company expand its fiber infrastructure in North America.
Lumen has continued to head lower in March
As of this writing, Lumen stock has fallen an additional 2.1% across March's trading. Over the same period, the S&P 500 was down roughly 1.4%, and the Nasdaq Composite was up roughly 0.6%
Stocks have been volatile amid the U.S. and Israel's war with Iran, and investors are worried that the conflict could lead to a sustained uptick in inflation that reduces the likelihood of interest rate cuts and potentially creates other valuation headwinds. Despite recent sell-offs, the stock has still managed to gain 45% over the last year thanks to the company's AI infrastructure strategy and contract wins. Sales connected to the company's private-connectivity-fabric deals should start to show up in quarterly reports this year, and the market will be looking to see the cumulative impact on revenue and earnings provided by the company's key new product category.
