CenturyLink IncCTL

Morningstar Rating

Stock Research and Analysis

by Michael Hodel, CFA

CenturyLink has made steady progress integrating recent acquisitions, improving customer metrics, and cutting costs to move toward revenue and margin stability. However, the firm has chosen to cut its dividend and instead repurchase stock. This move Read more

Bulls Say

CenturyLink’s dividend cut was a disappointment, but the stock still offers a very attractive--and more sustainable--yield and planned share repurchases should add additional value for shareholders.

The acquisitions of Qwest and Savvis position CenturyLink well in the enterprise services market. This business should constitute a growing percentage of sales over time.

While the Qwest and Embarq deals brought exposure to more competitive markets, a significant portion of CenturyLink's service territory is rural. Operations in these areas should generate relatively stable cash flow. Read more

Bears Say

As wireless has emerged as a viable alternative to fixed-line service, the number of phone lines CenturyLink serves has fallen steadily, taking away high-margin revenue. Predicting how quickly customers will replace their phones with wireless or other technologies is difficult, but this trend is likely to continue for several years.

Competition has pummeled the more urban markets that Embarq and Qwest served. CenturyLink is investing in network upgrades to regain share in these areas, but winning back customers lost to cable or other providers will be tough without competing on price.

While CenturyLink's financial position is better than that of many peers, it still isn't great, especially considering its unfunded postretirement benefit obligations. Read more

Management

The Embarq merger brought several positive changes to CenturyLink's governance structure, and the Qwest deal furthered these improvements. The firm eliminated a provision that had entitled shares owned continuously by one person since May 1987 to 10 Read more

Profile

With the acquisition of Embarq in 2009 and Qwest in 2010, CenturyLink is now the third-largest phone company in the United States, providing local phone service to 13.7 Read more