Bottom Line Inc

March 20, 2019 | CenturyLink Inc. | CTL

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This week’s Stock of the Week is in the middle of a profitable transformation.

Turnaround Time

CenturyLink Inc. (CTL) is still seen by most investors as an old landline company whose phone customers are going away quickly. That perception is misguided.

Since buying Level 3 in November 2017, CenturyLink has become a technology company focused on enterprise and business customers rather than consumers. About 75% of the firm’s revenue is now from the business-and-enterprise sector—and through Level 3, CenturyLink has one of the best fiber-optic networks for delivery of telecommunications services.

The old landline business is actually declining only a few percent a year, not quickly—so revenue is only dropping slowly. And profits are rising steadily as CenturyLink goes through its refocus and turnaround. The company took on high debt, $35 billion, for the Level 3 acquisition, and recently cut its dividend to put more cash toward debt paydown. But even the reduced dividend, which is $1/share/yr., recently yielded 8.27% and appears quite sustainable. Revenue was $23.4 billion last year and is likely to be $22.8 billion this year and $22.4 billion in 2020.

Fiscal year: December. Earnings per share: 2020 est./$1.30…2019 est./$1.20…2018/$0.98.

Thomas J. Sudyka, Jr. is portfolio manager at Lawson Kroeker Investment Management, Omaha, which manages $435 million, and co-portfolio manager of the $28 million LK Balanced Fund (LKBLX). LKFunds.com

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