Lumen Technologies: A Hold After Strong Q4 2023 Revenues (NYSE: LUMN)

When Lumen Technologies ( NYSE: LUMN) published its 4th quarter outcomes, the stock acquired 7.41% on the day. Markets responded favorably to the business’s non-GAAP revenues in the middle of its income decrease.

Do the outcomes recommend that Lumen will break out of its cent stock status? The stock traded listed below $2.00 given that last July 2023 and stopped working to trade above that ever since. Before that, the stock collapsed from $6.00 at the start of in 2015. Bears hold a substantial bet versus the stock with a 13.76% brief interest

Q4/2023 Outcomes

Lumen made $0.08 in non-GAAP revenues per share Income fell by 7.4% year-on-year to $3.52 billion. In its non-GAAP capital reconciliation, the $938 million in money tax payments in Q2/2023 is the most significant product. In the adjusted EBITDA non-GAAP reconciliation, I bolded the most substantial products. Devaluation and amortization costs was up to $751 million, as did goodwill disability to $1.9 billion. Severance expenses increased from $10 million in 2015 to $53 million.

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On the teleconference, President Kate Johnson highlighted the balance sheet enhancements. It extended its financial obligation maturities with a number of its lenders to 2029 and beyond. This will inject $1.325 billion in net brand-new funding, supporting its operations. The re-financing suggests the shareholder’s desire to purchase Lumen’s service.

Evaluated by its stock rate efficiency, investors are less delighted. Still, the CEO stated that 2 big tradition telecom business published income decreases in the cordless sector of around 8% to 10%. By contrast, Lumen’s service because area fell by 3.5% Y/Y. To outmatch the competitors, the company promoted the potential customers in today’s digital economy on hybrid, multi-cloud, or edge computing. GenAI companies, for instance, need fiber networks for digital services. They require low latency, quick information speeds, and big capability to support their services in a safe environment.

Chance

Lumen wishes to continue growing its public sector section, which grew in the double-digit portion Q/Q and Y/Y in the 4th quarter. In addition to attaining greater performance, the business increased its sales force by 15%.

The CEO promoted service wins in the Big Business sector. For instance, business like Uber ( UBER) selected Lumen’s 400-gig wave service. UBER stock traded above its 52-week high up on Feb. 7 after publishing outcomes that beat revenues and income expectations

The company has enthusiastic objectives for increasing its market share in the mass markets. It is releasing capital in such markets that expand its market reach therefore driving fiber market penetration. The business has a target of growing its fiber network by more than 500,000 areas. To accelerate its income development, it will require its sales and marketing personnel to go beyond expectations.

Assistance

Lumen released the following assistance displayed in the table listed below.

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Capital investment depends on $2.9 billion yet the company still anticipates totally free capital of in between $100 million to $300 million in 2024. The figure consists of a $700 million tax refund it got in the very first quarter of this year.

Its unique products consist of expenses to 3rd parties connected to supporting shift supports for its divestitures.

Although LUMN stock increased after the report, financiers beware about the irregular business expenses. Income from sales to the general public Sector is growing however OpEx will change every quarter. Financiers will require to await the full-year effect before they might see that cost-savings are settling.

Below, Lumen stock rallied ahead of the revenues report:

Possibilities are great that Lumen will accomplish the $300 million to $400 million in FCF this year. It currently sustained different one-time costs and unique charges connected to its financial obligation refinancing.

Dangers

Lumen’s wholesale income decrease might intensify this year. In the quarter, it fell by 11.2% Y/Y after it worked out with other providers. Additionally, Harvest items represented around 39% of its wholesale income. The 15.9% Y/Y drop represent the majority of the wholesale income drop. Lumen stated on the call that its Harvest item income will likely keep tipping over time. CFO Chris Stansbury stated it “will likely continue to decrease gradually and is a location we will continue to handle for money.”

LUMN stock has neither a strong ranking nor element grades to recommend the stock rally continues. It ratings well just on evaluation, with a grade of A+. Readers ought to keep in mind that this grade is the very same as 6 months earlier:

Listed below, Lumen ratings an A on nearly every evaluation metric. It does not provide a dividend. Earnings financiers might purchase T-Mobile ( TMUS), AT&T ( T), or Verizon ( VZ) rather.

Lumen’s peers consist of

Liberty Latin America ( LILA), EchoStar ( SATS), AST SpaceMobile ( ASTS), Anterix ( ATEX), and Bandwidth ( BAND). All of these companies are break-even at finest in the last 6 months:

Your Takeaway

Lumen stays an unloved stock that stopped working to draw in financiers. It requires to invest greatly in capital to grow its service. Luckily, the business has no strategies to offer its possessions at a discount rate or to divide its companies. That would interrupt its improvement strategies.

So long as Lumen invests thoroughly to grow its sales personnel, and enhance customer support levels and the quality of its item, its service will grow gradually.

After the revenues report, Lumen gets a Hold ranking.