Can Higher Business Sales Aid CenturyLink (CTL) Q1 Earnings?

CenturyLink, Inc. (NYSE:CTL) is scheduled to report first-quarter 2018 financial results after the closing bell on May 9. The company is likely to report higher consolidated revenues on the back of healthy growth dynamics.

Whether this could result into an earnings beat for the quarter remains to be seen.

Factors at Play

During the first quarter, CenturyLink received approval from the U.S. Department of Justice for the divesture of certain fiber network assets of erstwhile Level 3 Communications in Albuquerque, NM and Boise, ID.

The company has expanded its visibility into the global threat landscape in order to assist enterprises predict, protect and respond to evolving cyber threats. Also, CenturyLink was awarded a managed services contract with the State of Texas Department of Information Resources.

CenturyLink has secured Spark Service Provider (powered by Cisco) designation, which confirms its ability to support the complete portfolio of Cisco Spark solutions. The company has also broadened its hosted Unified Communications and Collaboration solutions offering.

Moving ahead, such factors are likely to lend momentum to CenturyLink’s top-line growth, although it continues to suffer from declining access lines and broadband subscriber losses.

On a segmental basis, the Zacks Consensus Estimate for revenues from the Business segment, which accounts for the lion’s share of total revenues, is currently pegged at $2,116 million, up from $1,356 million reported in first-quarter 2017. Revenues from Consumer segment are expected to be $1,346 million compared with $1,412 million reported in the prior-year quarter. Consequently, total revenues for the to-be-reported quarter are likely to be $5,963 million, up from $4,209 million reported in the year-earlier quarter.

Earnings Contraction

The Zacks Consensus Estimate for earnings per share (EPS) has been significantly reduced on a year-over-year basis. EPS for the first-quarter is pegged at 15 cents compared with 52 cents reported in the prior-year quarter.

What Our Model Says?

Our proven model does not conclusively show that CenturyLink is likely to beat earnings this quarter as it does not possess one of the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -16.94%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CenturyLink has a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

BlackBerry Limited (NYSE:BB) has an Earnings ESP of +100.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

South Jersey Industries, Inc. (NYSE:SJI) has an Earnings ESP of +3.47% and a Zacks Rank #1.

TheStreet, Inc. (NASDAQ:TST) has an Earnings ESP of +100.00% and a Zacks Rank #1.

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