Will Higher Top Line Buoy CenturyLink's (CTL) Q3 Earnings?

CenturyLink, Inc. (NYSE:CTL) is scheduled to report third-quarter 2018 results after the closing bell on Nov 8. In the last reported quarter, the company delivered a positive earnings surprise of 13%.

The company is likely to report higher revenues in the to-be-reported quarter owing to healthy growth dynamics. Whether this can result into an earnings beat remains to be seen.

Let’s find out how things are shaping up prior to the announcement.

Factors to Consider

During the third quarter, CenturyLink announced that it will offer private access to Oracle (NYSE:ORCL) Cloud with Oracle Cloud Infrastructure FastConnect to provide customers with a network experience that matches their cloud experience. CenturyLink also intend to provide private network connectivity to the IBM (NYSE:IBM) Cloud through CenturyLink Cloud Connect solutions so that customers can innovate more effectively by establishing low-latency connections on a global basis across private networks. Such technological collaborations are likely to generate incremental revenues for the company.

The company joined forces with VMware, in a bid to form Catalyst Club — the industry’s first leader-oriented network. The Catalyst Club is expected to widen the existing customer base of both CenturyLink and VMware.

CenturyLink was designated as an Amazon (NASDAQ:AMZN) Web Services (AWS) Managed Service Provider (MSP) Partner. The recognition reflected CenturyLink's focus on building robust services on AWS to deliver digital transformation to organizations. CenturyLink is an AWS Partner Network Advanced Consulting Partner, and for the past four years it has been the AWS Networking Sponsor. The company provides network and data systems management, Big Data analytics and IT consulting, and operates data centers in North America, Europe and Asia. The AWS MSP certification reinstated that the company’s approach adheres to the latest generation of cloud-native operations.

Furthermore, CenturyLink introduced a suite of fiber-based broadcast services that enables safe, secure and seamless connectivity to cloud-based media services and workflows. Dubbed the Vyvx Cloud Connect, the new network service facilitates broadcasters as well as studio and stadium venues across the country to easily upload live and linear video into and out of the cloud.

Top-Line Expansion

CenturyLink remains confident about its financial performance for the third quarter. The company’s existing network with millions of customers, global fiber footprint, and an extraordinary IP backbone delivers connections to the world's most important cloud, data center and software-as-a-service providers. Moreover, the expansion of new services like SD-WAN and embedded security enables it to create competitive advantages in enterprise networking with the scale and scope few others can match. Also, the company is pleased with the integration of Level 3. It is focused on driving profitable growth, capturing synergies and taking advantage of the cost and customer experience transformation opportunities.

The Zacks Consensus Estimate for revenues from the Business segment, which accounts for the lion’s share of total revenues, is currently pegged at $4,349 million. For the third quarter, revenues from Consumer are expected to be $1,342 million, while revenues from Regulatory are estimated to be $184 million. Consequently, the Zacks Consensus Estimate for total revenues stands at $5,890 million, up from $4,034 million reported in the year-earlier quarter. Adjusted earnings per share are pegged at 27 cents, down from 42 cents reported a year ago.

What Our Model Says

Our proven model conclusively shows that CenturyLink is likely to beat earnings this quarter as it possesses both 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 exactly the case here as you will see below:

Earnings ESP: CenturyLink’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +10.29% as the former is pegged at 30 cents and the latter at 27 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CenturyLink, Inc. Price and EPS Surprise

CenturyLink, Inc. Price and EPS Surprise | CenturyLink, Inc. Quote

Zacks Rank: CenturyLink currently carries a Zacks Rank #2. This increases the predictive power of ESP and makes us reasonably confident of an earnings beat.

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.

Other Stocks to Consider

Here are some other 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:

Wright Medical Group N.V. (NASDAQ:WMGI) has an Earnings ESP of +11.76% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Evergy, Inc. (NYSE:EVRG) has an Earnings ESP of +3.87% and a Zacks Rank #1.

Flowserve Corporation (NYSE:FLS) has an Earnings ESP of +1.72% and a Zacks Rank #2.

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