GICS Sector : Communication Services
Lumen Technologies, Inc., a facilities-based technology and communications company, provides various integrated products and services under the Lumen, Quantum Fiber, and CenturyLink brands to business and residential customers in the United States and internationally.The company operates in two segments, Business and Mass Markets.It offers compute and application services, such as cloud services, IT solutions, unified communication and collaboration solutions, colocation and data center services, content delivery services, and managed security services; and IP and data services, including VPN data network, Ethernet, internet protocol (IP), and voice over internet protocol.
Lumen reported a strong financial performance in Q3, with revenue coming in ahead of Street consensus. The company's adjusted EBITDA, excluding special items, was $787 million, with a 25.5% margin. EPS loss was narrower than expected at $-0.2 compared to estimates of $-0.31. Free cash flow, excluding special items, was over $1.7 billion, a significant improvement. As Christopher Stansbury noted, "We reported strong third-quarter financials, implemented phase 1 of our new ERP system, and continue to improve the balance sheet."
Publication Date: Nov -04
The company's total business grow revenue was up 7.7% year-over-year, driven by continued strength in dark fiber and IP. Grow revenue increased 10.5% year-over-year, with core network Grow products with non-PCF driving the largest portion of the increase. The emerging growth of digital has yet to materially impact revenue performance, but the company is optimistic about its digital future, including NaaS capabilities.
With a P/S Ratio of 0.96 and EV/EBITDA of 22.5, the market appears to be pricing in a significant improvement in Lumen's financial performance. The company's Net Debt / EBITDA ratio is high at 12.64, but the expected sale of its fiber-to-the-home business to AT&T for $5.75 billion should help reduce leverage. The company's Free Cash Flow Yield is 10.1%, indicating a decent return for investors.
Lumen is making significant investments in its digital transformation, including upgrading data centers, additional cross-connects, and off/on-net locations. The company expects to achieve $500-600 million in digital revenue by 2028, driven by NaaS, cloud on-ramp security, and ecosystem partnerships. The launch of IoD off-net and the Lumen Connected ecosystem partnership with Palantir are expected to drive growth.
The company expects adjusted EBITDA stability over the next few quarters and sees an inflection to growth in 2026. Analysts estimate next year's revenue growth at -6.0%, but Lumen's focus on digital transformation and cost structure optimization should help drive growth in the long term. With a strong financial performance and a clear vision for its digital future, Lumen is well-positioned to navigate the challenges of the telecommunications industry.
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Lumen Technologies' 4.73% growth is driven by increasing demand for cloud-based services, expansion of its fiber network, and growing adoption of edge computing solutions. Additionally, the company's focus on 5G network infrastructure and strategic partnerships with major cloud providers contribute to its growth momentum.
Lumen's Mass Markets segment growth of 7.4% is driven by increasing demand for high-speed internet and fiber-based services, particularly among small and medium-sized businesses. Additionally, the company's investments in network infrastructure and customer experience enhancements have improved sales and retention rates, contributing to the segment's growth.
Lumen's network services provide a range of connectivity options, including IP VPN, Ethernet, and wavelength services, to help businesses connect their locations and data centers.
Lumen Cloud Connect provides secure, high-performance connectivity to leading cloud service providers, including Amazon Web Services, Microsoft Azure, and Google Cloud Platform.
Lumen's security services provide threat detection, incident response, and security consulting to help businesses protect their networks and data from cyber threats.
Lumen's voice and collaboration services provide advanced communication and collaboration tools, including unified communications, contact center, and conferencing solutions.
Lumen's IT services provide managed IT services, including infrastructure management, application management, and IT consulting, to help businesses optimize their IT operations.
Lumen's edge services provide low-latency, high-performance computing and storage at the edge of the network, enabling real-time processing and analysis of IoT data.
Lumen Technologies, Inc. faces moderate threat from substitutes due to the availability of alternative communication services and technologies.
Lumen Technologies, Inc. has a large customer base, but individual customers do not have significant bargaining power due to the company's diversified customer base.
Lumen Technologies, Inc. has a moderate level of dependence on its suppliers, but it has a diversified supplier base, which reduces the bargaining power of individual suppliers.
The threat of new entrants is low for Lumen Technologies, Inc. due to the high barriers to entry in the telecommunications industry, including significant capital requirements and regulatory hurdles.
The telecommunications industry is highly competitive, and Lumen Technologies, Inc. faces intense rivalry from established players and new entrants, which can lead to pricing pressure and reduced market share.
| Value | |
|---|---|
| Debt Weight | 97.97% |
| Debt Cost | 5.73% |
| Equity Weight | 2.03% |
| Equity Cost | 9.77% |
| WACC | 5.81% |
| Leverage | 4819.90% |
Value: 4.9
Growth: 5.9
Quality: 5.2
Yield: 0.0
Momentum: 5.0
Volatility: 6.0
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