CenturyLink merged with Qwest to become the third-largest telecommunications company in the United States in 2010. The company went on to gobble up technology companies like Savvis, a cloud infrastructure company in 2012 and broadband provider Level 3 Communications in 2017. The company changed its name from CenturyLink to Lumen Technologies (NYSE: LUMN) on September 18, 2020. Copper-based legacy services would continue under CenturyLink and fiber-based products and services would be served under the Quantum Fiber brand . The company provides cloud, computing, voice, television, infrastructure, Internet and broadband services to enterprises, small businesses and residential customers. Quantum Fiber is driving growth as it expands into more than 30 cities and metropolitan areas across the United States, expanding access to millions of new consumers. Value investors may be interested in its assets, which include more than 400,000 miles of fiber optics serving customers in more than 60 countries. Google Fiber (NASDAQ: GOOG) deployed 80,000 kilometers of fiber in 60 markets at a cost of more than $14 billion, twice the market capitalization of Lumen stock. The cheap price-to-book ratio of 0.5 makes it a play asset if it continues to sell more coins from the set, is acquired, or goes private. Can the new CEO actually change his downward trajectory?
Raising funds and fending off the competition
The company ditched some of its businesses to pay off debt which will be reduced to $20.4 billion after paying a tax bill of between $900 million and $1 billion for its ILEC sales in 20 states from its LATAM business to Apollo for $7.5 billion. The Board of Directors made the decision to eliminate the $1.00 annual dividend and implement a share buyback program of up to $1.5 billion over a two-year period. The Company expects an impact on inflation for the whole of next year. Focusing more on digitizing front and back office functions is a top priority. Lumen faces competition from major broadband providers like AT&T (NYSE: T), Verizon (NYSE: VZ), and Comcast (NASDAQ: CMCSA) as well as cloud service and application providers, including Amazon Web Services ( NASDAQ: AMZN), Microsoft Azure (NASDAQ: MSFT) and Google Cloud (NASDAQ: GOOG).
Upper and lower downward trajectories
Lumen announced its third quarter 2022 results on November 2, 2022. The company reported earnings per share (EPS) of $0.14 missing analyst consensus estimates for $0.35 per (-$0.21). Net income was $578 million compared to $544 million in the same period last year. Special items of (-$527 million) and (-$31 million) caused EPS to fall from $0.57 to $0.14. Revenue continued to fall (-10.2%) year-over-year (YoY) to $4.39 billion, minus analysts’ estimates of $4.41 billion. Adjusted EBITDA fell to $1.688 billion from $2.078 billion a year earlier. The company has completed the $2.7 billion divestment of its Latin American Stonepeak business. The Company generated $620 million of free cash flow. Lumen completed the $7.5 billion divestiture of its 20-state ILEC business to Apollo on Oct. 3, 2022. The company eliminated its stock dividend and authorized a two-year and up to two-year stock buyback program. $1.5 billion. Reached an exclusive deal to sell its EMEA business to Colt Technology for $1.8 billion. Incoming Lumen President and CEO Kate Johnson said, “The opportunity for Lumen is significant, and I look forward to taking advantage of today’s announcements and adjusted capital allocation priorities for generate profitable growth and shareholder value. Jeff, the Lumen Board and I are fully aligned with these decisions. I can’t wait to be operational on November 7th. The company forecasts adjusted EBITDA of between $6.9 billion and $7.1 billion for fiscal 2022.
Ministry of Defense contract
On November 1, 2022, Lumen announced that it had been awarded a 10-year, $1.5 billion defense contract with the Defense Information Systems Agency. Lumen will provide essential network transportation and communications services to enable the US Department of Defense (DOD) to reconnoitre its national security objectives in the Asia-Pacific region and Alaska. Contracted services range from Internet, Ethernet and Wavelength to protect America’s interests. Lumen’s dark fiber was used exclusively for government contracted services and is published in the CenturyLink segment.
Failure after failure
The LUMN weekly candlestick chart illustrates the descending triangle breakdown that occurred in August 2022, with each previous bounce lower until the support at $10.07 finally gave way. recover to $7.60 from October to November 1, 2022. On November 2, 2022, shares of LUMN crashed (-17%) in reaction to its third quarter 2022 earnings report and the elimination of dividends triggering the weekly bear flag breakdown. The weekly resistance of the 20-period exponential moving average (EMA) is yet to be tested as it continues to fall to $8.27, followed by the 50-period MA at $10.40. The MSL daily trigger sits at $6.03 after hitting a new low of $5.68. The pullback support levels are seen at the lows of $5.68 at $5.54, $4.94, $4.44, $3.62 and $3.01.
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