Lumen (LUMN) Q2 Earnings Miss Estimates, Revenues Fall Y/Y

Lumen Technologies, Inc. LUMN reported adjusted earnings (excluding special items) of 35 cents per share in second-quarter 2022 compared with 48 cents per share in the prior-year quarter. The bottom line missed the Zacks Consensus Estimate by 23.9%.

Quarterly total revenues dropped 6.3% year over year to $4,612 million, owing to the conclusion of the CAF II program. The top line marginally beat the consensus estimate by 0.3%.

Recently, the company completed the sale of its Latin America business. It is targeting to close the sale of its 20-state ILEC business in the fourth quarter of 2022.

Following the announcement, shares are down 3.7% in the premarket trading on Aug 4.

Lumen Technologies, Inc. Price, Consensus and EPS Surprise

 

Lumen Technologies, Inc. Price, Consensus and EPS Surprise

Lumen Technologies, Inc. price-consensus-eps-surprise-chart | Lumen Technologies, Inc. Quote

 

Segment Performance

By segment, Business revenues fell 3% to $3.416 million due to unfavorable foreign currency impact and the sale of our correctional facilities business.

IGAM revenues declined 1% year over year to $996 million, while revenues from Large Enterprise fell 6% to $884 million due to the sale of its correctional facilities communication services business. Mid-Market Enterprise revenues fell 5.3% to $626 million. Revenues in Wholesale tumbled 1% to $910 million.

Revenues from Mass Markets declined 15% year over year to $1.196 million due to a fall in CAF II revenues.

Lumen anticipates witnessing healthy momentum in Quantum investments and fiber to the home investment strategy to bolster growth of consumer and small business markets in the upcoming quarters. The company added 28,000 Quantum Fiber subscribers taking the count to 858,000 quantum fiber subscribers in the reported quarter. Total “enablements” were nearly 205,000, with 185,000 of these enabled locations in the company’s 16 retained states. As of Jun 30, total enabled locations in the retained states stood at 2.9 million. The company is targeting 1 million enablements by year-end. The company also rolled out an 8-Gig Quantum Fiber solution.

Other Quarterly Details

Total operating expenses fell 6% year over year to $3.7 billion, primarily due to lower depreciation and amortization expenses.

Operating income was $912 million, down 9% from the prior-year quarter’s levels. Adjusted EBITDA (excluding special items) slipped to $1.811 billion from $2.109 billion for respective margins of 39.3% and 42.8%, owing to the closure of the CAF II program in 2021.

Cash Flow & Liquidity

In the second quarter, Lumen generated $1.396 billion of net cash from operations compared with $1.639 billion a year ago.

Free cash flow (excluding cash special items) for the year was $668 million compared with $1.044 billion in the year-ago quarter.

As of Jun 30, 2022, the company had $360 million in cash and cash equivalents with $27,965 million of long-term debt compared with the respective tallies of $366 million and $28,397 million as of Mar 31, 2022.

2022 Outlook

For 2022, Lumen continues to expect adjusted EBITDA in the range of $6.9-$7.1 billion. Free cash flow is projected to be between $2 billion and $2.2 billion.

Capital expenditures are estimated between $3.2 billion and $3.4 billion. The effective income tax rate for the full year is estimated to be nearly 26%.

Zacks Rank & Other Stocks to Consider

Lumen currently carries a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks from the broader technology sector worth consideration are Cadence Design Systems CDNS, Intuit INTU and Badger Meter BMI. Cadence and Badger Meter sports a Zacks Rank #1 (Strong Buy), while Intuit carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BMI’s 2022 earnings is pegged at $2.30 per share, up 7% in the past 60 days. Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters, with the average being 12.6%. Shares of BMI have lost 3.4% of their value in the past year.

The Zacks Consensus Estimate for Cadence’s 2022 earnings is pegged at $4.11 per share, up 5.7% in the past 60 days. The long-term earnings growth rate is anticipated to be 17.7%.

CDNS earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 9.8%. Shares of CDNS have increased 19.9% in the past year.

The Zacks Consensus Estimate for Intuit’s fiscal 2022 earnings is pegged at $11.72 per share, rising 0.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 15.6%.

Intuit’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 16.8%. Shares of INTU have lost 13.4% in the past year.

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