CenturyLink Inc Stock Buy Recommendation Reiterated (CTL)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- CenturyLink (NYSE: CTL) has been reiterated by TheStreet Ratings as a buy with a ratings score of B- . The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 4.7%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, CTL's share price has jumped by 29.25%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • The gross profit margin for CENTURYLINK INC is rather high; currently it is at 58.70%. Regardless of CTL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.60% trails the industry average.
  • CENTURYLINK INC's earnings per share declined by 36.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CENTURYLINK INC reported lower earnings of $1.29 versus $3.13 in the prior year. This year, the market expects an improvement in earnings ($2.54 versus $1.29).
  • Even though the current debt-to-equity ratio is 1.06, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.

CenturyLink, Inc. operates as an integrated telecommunications company in the United States. The company provides local and long-distance, network access, private line, public access, broadband, data, managed hosting, colocation, wireless, and video services to consumers and businesses. The company has a P/E ratio of 54.1, above the average telecommunications industry P/E ratio of 52.1 and above the S&P 500 P/E ratio of 17.7. CenturyLink has a market cap of $26.59 billion and is part of the technology sector and telecommunications industry. Shares are up 14.8% year to date as of the close of trading on Thursday.

You can view the full CenturyLink Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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