CenturyLink Leaves Its Telecom Peers in the Dust
When there are just three stocks in a sector, anyone has the potential to move the entire group. That’s the case with telecommunications today, which is the S&P 500’s best performer thanks to CenturyLink’s (CTL) earnings.
As a reminder, there are just three stocks in the S&P 500 Telecommunications Services Index: AT&T (T), Verizon Communications (VZ), and CenturyLink. Verizon reported on April 24, and ATT&T reported on April 25, and today it was CenturyLink’s turn.
The company reported adjusted earnings of 25 cents a share, beating forecasts for 15 cents, even as sales of $5.95 billion missed analyst estimates for $5.96 billion. As a result, CenturyLink has gained 7.7% to $19.43 at 11:459 a.m. today, while Verizon has advanced 0.9% to $46.82, and AT&T has risen 1.2% to $31.79. The Telecommunications Services sector is up 1.4%. The Vanguard Communication Services ETF (VOX) has rallied 1.3% to $83.09.
Why are investors rejoicing over CenturyLink’s mixed results? Because the earnings beat was driven by “strong synergy achievement” following its merger with Level 3 Communications, writes Wells Fargo analyst Jennifer Fritzsche, who called the numbers “good enough…Put simply, we believe enough was done in Q1 to prove the LVLT integration is well under way.”
Not everyone is convinced that the news was so good. Cowen’s Gregory Williams and team “question div. sustainability with coverage at ~70% with little/no improvement on a declining high-margin top line.” CenturyLink’s dividend yield sits over 11%.
But today’s move isn’t just a one-time bounce. In fact, CenturyLink has been doing something the rest of the sector hasn’t been able to do this year: It’s gaining.
