Lumen's stock advances as telecom company posts an earnings surprise

By Emily Bary

Lumen edges past top-line expectations

Lumen Technologies Inc. on Tuesday reported a surprise adjusted profit for its latest quarter, while beating expectations on the top line.

The telecommunications company saw revenue of $3.52 billion in the fourth quarter, down 7% from a year before but ahead of the consensus view, which was for $3.45 billion.

Shares were up about 2% in choppy after-hours trading.

Lumen (LUMN) looks at its business segment in three categories, with its "grow" products, including unified communications and managed security, seen as those that could help "future-proof" the company. Revenue for that category fell 1% in the latest quarter to $1.08 billion.

The company's "nurture" business category, which includes ethernet, declined 12% to $826 million. "Harvest" businesses, including legacy voice and managed hosting, logged a 9% revenue decline to $639 million.

Chief Executive Kate Johnson said in a release that Lumen "made material progress on our strategic priorities" during 2023.

Lumen took a $1.9 billion non-cash goodwill impairment charge for the fourth quarter, and it reported a net loss of $2.0 billion, or $2.03 a share. That compares with a $3.1 billion loss, equating to $3.08 a share, for the year-earlier quarter, which also included a multibillion-dollar charge.

Adjusted earnings per share came in at 8 cents for the latest quarter, down from 43 cents a year before, though analysts had been looking for a 2-cent adjusted loss per share.

The company recorded adjusted earnings before interest, taxes, depreciation and amortization of $1.10 billion, while analysts had been modeling $1.05 billion.

Lumen previously announced a debt-restructuring agreement that it said would address more than 70% in aggregate of its outstanding indebtedness. That deal "buys valuable time and capital," Cowen & Co. analyst Gregory Williams wrote recently.

For 2024, Lumen expects $4.1 billion to $4.3 billion in adjusted Ebitda, while analysts were modeling $4.15 billion. The company also models $100 million to $300 million in free cash flow, while the FactSet consensus was for $210 million.

The company's forecast for $2.7 billion to $2.9 billion in capital expenditures exceeded the consensus view, which was for $2.66 billion.

-Emily Bary

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02-06-24 1615ET

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