CenturyLink Q4 earnings beat estimates; stock falls on dividend cut

Earnings of CenturyLink (CTL) increased and topped expectations in the fourth quarter, despite a decline in revenues. Meanwhile, the company’s stock plunged about 11% following the announcement as the management’s decision to reduce the annual dividend triggered a sell-off.

The integrated communications firm reported adjusted earnings of $0.37 per share for the December quarter – excluding consumer goodwill impairment charge and other one-off items –  which is sharply higher than $0.18 per share posted in the same period last year. Earnings also surpassed market expectations.

On an unadjusted basis, the company reported a net loss of $2.41 billion or $2.26 per share for the three-month period compared to profit of $1.13 billion or $1.06 per share a year earlier. Revenues dropped 3.8% year-over-year to $5.78 billion and matched analysts’ forecast.

The stock plunged about 11% following the report as the management’s decision to reduce the dividend triggered a sell-off

“In 2019, we are shifting our focus from integration to transformation.  We are focused on profitable revenue growth in our business markets and believe the scope and scale of our global assets, along with our innovative product portfolio, position us to succeed,” said CEO Jeff Storey.

The company said its board of directors decided to reduce the annual dividend to $1.00 from $2.16, beginning with the next dividend declaration, as part of shifting the capital allocation priorities. The management is also making changes to the revenue reporting categories to better align the management of the business.

Also see: CenturyLink Q4 2018 Earnings Conference Call Transcript

For fiscal 2019, CenturyLink projects adjusted EBITDA in the range of $9.0 billion to $9.2 billion and free cash flow between $3.10 billion and $3.40 billion. Full-year capital expenditure is currently estimated at $3.50-$3.80 billion.

CenturyLink shares have lost about 22% since the beginning of the year and are currently trading at a 20-year low. The stock closed Wednesday’s regular session higher but fell sharply in the after-hours trading following the announcement.

Get access to timely and accurate verbatim transcripts that are published within hours of the event