After nixing the 13% dividend, is Lumen Technologies okay to own?

After nixing the 13% dividend, is Lumen Technologies okay to own?

CenturyLink merged with Qwest to become the third largest telecommunications company in the US in 2010. The company continued to absorb technology companies such as Savvis, a cloud infrastructure company in 2012 and broadband provider Level 3 Communications in 2017. The company changed its name from CenturyLink to Lumen Technologies (NYSE: LUMN) on September 18, 2020. Legacy copper-based services would continue under CenturyLink and fiber-based products and services would be offered under the Quantum Fiber brand. The company provides cloud, IT, voice, TV, infrastructure, internet and broadband services to enterprise, small business and residential customers. It’s Quantum Fiber is the growth engine as it expands in more than 30 U.S. cities and metropolitan areas and expands access to millions of new consumers. Value investors may be interested in its assets, which include more than 400,000 fiber optic routes serving customers in more than 60 countries. Google Fiber (NASDAQ: GOOG) has deployed 50,000 miles of fiber across 60 markets at a cost of more than $14 billion, twice the market cap of Lumen stock. Its cheap price-to-book value ratio of 0.5 makes it an advantage if it continues to sell more parts of the whole, is acquired or goes private. Can the new CEO effectively change his downward trajectory?



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Raise money and fend off competition

The company has divested some of its businesses to pay off debt that will be reduced to $20.4 billion after paying a tax bill of between $900 million and $1 billion for the ILEC sale of its LATAM operations in 20 states to Apollo for $7.5 billion. The Board of Directors has made the decision to eliminate the annual dividend of $1.00 and to implement a share repurchase program of up to $1.5 billion over two years. The company expects a full-year inflation impact next year. Further focus on digitization of front and back office functions has top priority. Lumen faces competition from the major broadband providers such as AT&T (NYSE: T), Verizon (NYSE: VZ), and Comcast (NASDAQ: CMCSA), as well as cloud service and application providers, including Amazon Web Services (NASDAQ: AMZN), Microsoft Azure (NASDAQ: MSFT) and Google Cloud (NASDAQ: GOOG).

Top and bottom line down trajectories

Lumen reported its Q3 2022 earnings on November 2, 2022. The company reported earnings per share (EPS) of $0.14, beating consensus analyst estimates of $0.35 by (-$0.21). Net income was $578 million versus $544 million in the same period a year ago. Special items of (-$527 million) and (-$31 million) dropped earnings per share from $0.57 to $0.14. Revenue continued to fall (-10.2%) year over year (YoY) to $4.39 billion, missing analyst estimates of $4.41 billion. Adjusted EBITDA decreased to $1.688 billion compared to $2.078 billion in the same period last year. The company completed the divestment of its Latin American business Stonepeak for $2.7 billion. The company generated $620 million in free cash flow. Lumen completed the divestment of its ILEC business in 20 states for $7.5 billion to Apollo on October 3, 2022. The company eliminated its stock dividend and authorized a two-year share repurchase program of up to $1.5 billion. Has entered into an exclusive agreement to sell its EMEA business to Colt Technology for $1.8 billion. Lumen’s new president and CEO, Kate Johnson, said: “The opportunity for Lumen is significant, and I am eager to leverage today’s announcements and adjusted capital allocation priorities to drive profitable growth and shareholder value. Jeff, the Board of Directors van Lumen and I are fully aligned with these decisions, and I look forward to starting on November 7.” The company expects adjusted EBITDA in the range of $6.9 billion to $7.1 billion for fiscal year 2022.

Ministry of Defense contract

On November 1, 2022, Lumen announced that it has won a 10-year, $1.5 billion defense contract from the Defense Information Systems Agency. Lumen will provide essential network transport and communications services to enable the United States Department of Defense (DOD) to recognize its national security objectives in the Asia Pacific and Alaska region. The contract services range from internet, ethernet and wavelength to protect America’s interests. Lumen’s dark fiber is used exclusively for government contract services and is posted under the CenturyLink segment.
After nixing the 13% dividend, is Lumen Technologies okay to own?

Failure after failure

LUMN’s weekly candlestick chart illustrates the breakdown of the descending triangle that occurred in August 2022, as every previous bounce has been lower until the $10.07 support finally gave way. rally back to $7.60 in October through November 1, 2022. On November 2, 2022, LUMN shares plunged more than (-17%) in response to its Q3 2022 earnings report and dividend elimination, which led to the weekly bear flag breakdown. The weekly 20-period exponential moving average (EMA) resistance has not yet been tested as it continues to fall to $8.27, followed by the 50-period MA at $10.40. The daily MSL trigger is set at $6.03 after making a new swing low of $5.68. Pullback support levels sit at the $5.68 swing low to $5.54, $4.94, $4.44, $3.62 and $3.01.

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