CenturyLink (CTL) Stock Falls on JPMorgan Downgrade

NEW YORK (TheStreet) -- Shares of CenturyLink (CTL) were lower by 3.5% to $30.77 on heavy trading volume Thursday after JPMorgan downgraded its rating for the telecommunications company.

In a note to investors, JPMorgan downgraded CeturyLink to "neutral" from "overweight," and lowered its price target for the company to $35 from $42. The downgrade comes after CenturyLink's analyst day in which CEO Glenn Post and other executives presented.

"The biggest takeaways from the meeting were the longer term margin guidance of mid-30%, the company taking the potential REIT transaction off the table, and the business continuing to face topline pressure from lower CPE sales and wholesale this year," analyst Philip Cusick wrote.

About 6.1 million shares of CenturyLink were traded by 11:19 a.m. Thursday, above the company's average trading volume of about 4 million shares a day.

TheStreet Ratings team rates CENTURYLINK INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CENTURYLINK INC (CTL) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CENTURYLINK INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CENTURYLINK INC turned its bottom line around by earning $1.35 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $1.35).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for CENTURYLINK INC is rather high; currently it is at 57.13%. 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 4.31% trails the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CENTURYLINK INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Even though the current debt-to-equity ratio is 1.39, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Despite the fact that CTL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.59 is low and demonstrates weak liquidity.
  • You can view the full analysis from the report here: CTL Ratings Report

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