Lumen Technologies, Inc. LUMN reported an adjusted loss (excluding special items) of 13 cents per share for the third quarter of 2024, which was narrower than the Zacks Consensus Estimate of a loss of 20 cents. The company reported a loss per share of 9 cents in the prior-year quarter.
Quarterly total revenues were $3.221 billion, down 11.5% year over year. The decline was due to the negative impact of divestitures, commercial agreements and the sale of the CDN business. However, the metric beat the Zacks Consensus Estimate by 0.6%.
Driven by significant AI-fueled connectivity demand, Lumen secured an additional $3 billion in incremental Private Connectivity Fabric (“PCF”) deals, bringing the total to $8 billion in new PCF sales since June 2024.
Lumen has been inking deals with tech giants for its PCF solutions. The company announced a collaboration with Alphabet’s GOOGL Google Cloud to power proactive data insights and AIOps across its network. Lumen has utilized Google Cloud’s databases, infrastructure and BigQuery data and analytics platform to create a Lumen Digital Twin for gaining insights across the Lumen network in real time. Alphabet has chosen Lumen to expand network capabilities for Google Cloud to cater to the increasing demand for Google Cloud services and foster AI innovation.
Lumen Technologies, Inc. Price, Consensus and EPS Surprise
Lumen Technologies, Inc. price-consensus-eps-surprise-chart | Lumen Technologies, Inc. Quote
A few days back, LUMN partnered with Amazon AMZN to boost data center connectivity and enhance network delivery of cloud technologies. LUMN will leverage Amazon Web Service (“AWS”) tech (including AI and machine learning) to upgrade its applications and systems. In turn, the company will provide fiber connectivity to AWS data centers. This will aid enterprise clients in building and delivering scalable AI applications across AWS local zones and regions. Prior to that, Lumen partnered with Meta Platforms META to elevate the latter’s network capabilities. The expanded network will deliver a dedicated interconnection for Meta’s cutting-edge infrastructure.
LUMN raised its free cash flow guidance for 2024, driven by higher cash flows associated with PCF sales growth. For 2024, free cash flow is now anticipated to be between $1.2 billion and $1.4 billion. Earlier, the company expected free cash flow in the range of $1-$1.2 billion.
LUMN stock is down 4.5% in pre-market trading session today. In the past year, shares of LUMN have gained 476.9% compared with the sub-industry’s growth of 60.5%.
Image Source: Zacks Investment Research
Lumen’s Segment Performance
Lumen has adopted a new reporting structure that has collaborated International and Global Accounts and large enterprises into the large enterprise channel. The company has moved the public sector to its separate channel.
By segment, Business revenues fell 13% to $2.536 billion while revenues from Large Enterprises plunged 8% to $839 million. Mid-Market Enterprise revenues declined 7% to $471 million. Public Sector revenues were down 4% to $427 million. LUMN expects the public sector revenues to grow this year driven by increasing momentum in large bookings. Revenues of North America’s Enterprise Channels were down 7% to $1.737 billion. The metric for Wholesale decreased 9% to $706 million.
Revenues from Mass Markets were down 7% year over year to $685 million.
Lumen anticipates witnessing healthy momentum in the Quantum business in the upcoming quarters. The company added 43,000 Quantum fiber subscribers, taking the count to 1 million in the reported quarter.
In the third quarter, LUMN added 131,000 Fiber broadband-enabled locations. As of Sept. 30, 2024, the total enabled locations in the retained states was 4 million. The company is targeting to achieve 500,000 enabled locations in 2024.
Margin Performance of Lumen
Total operating expenses decreased 9% year over year to $3,095 million.
Operating income was $126 million compared with $223 million in the year-ago quarter. Adjusted EBITDA (excluding special items) slipped to $899 million from $1.049 billion for respective margins of 27.9% and 28.8%.
Lumen’s Cash Flow & Liquidity
In the third quarter, Lumen generated $2.032 billion of net cash from operations compared with $881 million used in the prior-year quarter.
Free cash flow (excluding cash special items) for the third quarter was $1.198 billion compared with $43 million in the prior-year quarter.
As of Sept. 30, 2024, the company had $2.64 billion in cash and cash equivalents with $18.142 billion of long-term debt compared with the respective figures of $1.495 billion and $18.411 billion as of June 30, 2024.
LUMN’s 2024 Outlook
For 2024, Lumen continues to expect adjusted EBITDA in the band of $3.9-$4 billion and capital expenditures to be between $3.1 billion and $3.3 billion. Lumen added that given the overall business trends and initial cost impacts from the incremental PCF sales, it expects 2024 EBITDA at the low end of the guided range.
The company continues to expect 2025 EBITDA to be below the levels of 2024, owing to the investments in transformation and costs along with higher startup costs for PCF sales and legacy revenue declines. LUMN expects EBITDA to significantly rebound in 2026 and register growth thereafter.
Zacks Rank of LUMN
Lumen currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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