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CenturyLink Rating Held At ‘Underperform’ After Earnings Report
By Kelly Teal
August 07, 2014 - News

CenturyLink Inc. didn’t see its rating from D.A. Davidson change as a result of its second-quarter earnings report on Wednesday.

Investment bank D.A. Davidson on Thursday reiterated its “underperform" rating on CenturyLink, the day after the service provider reported a lower profit compared to a year ago.

Still, D.A. Davidson raised its price target on CenturyLink from $30 to $38 and said the company beat analysts’ top-line expectations and D.A. Davidson’s bottom-line forecasts.

"We don't see tremendous downside in the stock, but still think CenturyLink may raise its capex budget more in 2015 as it rolls out Gigabit speeds in more cities, and we may see more of a drag in EBITDA in 2015 due to higher IPTV marketing expenses," wrote Donna Jaegers, a D.A. Davidson analyst, in a client memo.

CenturyLink this week said it has introduced 1Gbps service to 16 cities – a sizable financial undertaking.

Indeed, due to higher operating expenses and acquisitions costs, CenturyLink’s second-quarter profit fell 28 percent, from $269 million in 2013 to $193 million. However, the company came in just above consensus estimates on revenue, posting $4.54 billion. Analysts were expecting $4.5 billion. Glen Post, president and CEO of CenturyLink, attributed those numbers to demand for high-bandwidth data services, cloud and hosting platforms, and Prism TV, CenturyLink’s IPTV product.

CenturyLink continues to see declines in its legacy services revenue, just like its fellow incumbents.

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