CenturyLink Inc.'s CTL fourth-quarter earnings more than doubled as the telecommunications company recorded fewer operating expenses, though revenue declined slightly.
Shares tumbled 13% to $36.30 after hours as the company also unveiled changes in its capital allocation strategy, including plans to cut its quarterly dividend by 26%.
CenturyLink said its board plans to lower quarterly payout to 54 cents a share from 72.5 cents a share. The board expects to approve this new rate later this month. The company on Wednesday also said it has authorized a $2 billion stock-repurchase program.
The move prompted Fitch Ratings and Moody's Investors Service to take negative actions on CenturyLink's ratings. Fitch downgraded its ratings on CenturyLink by one notch to double-B-plus, putting it one step into junk territory, noting the company's share repurchase program and dividend cut will result in a lower level of debt reduction over the next two years than Fitch had previously expected. Moody's, meanwhile, placed its rating on Century Link on review for a downgrade. It currently rates the company at Baa3, one notch away from junk.
CenturyLink, the third-largest landline provider in the U.S., has recorded increases in high-speed Internet subscriptions in recent quarters and has seen revenue helped by contributions from its 2011 acquisitions of Qwest Communications and Savvis Inc. Meanwhile, the company's legacy businesses have been affected by access-line losses and lower access revenue in recent periods. The company expects top-line trends to improve this year to see revenue stabilize in 2014.
Chief Executive Glen Post said the company saw solid strategic data and hosting revenue growth in 2012, driven by strong demand from business custoemrs for high bandwidth data services, colocation and managed services, including cloud.
Overall, CenturyLink reported a profit of $233 million, or 37 cents a share, up from $109 million, or 18 cents a share, a year earlier. Excluding amortization and special items, per-share earnings rose to 67 cents from 55 cents. Revenue slipped 1.5% to $4.58 billion.
In November, the company forecast earnings of 64 cents to 69 cents and revenue of $4.56 billion to $4.61 billion.
Operating expenses fell 4.9% to $3.92 billion.
Strategic revenue rose 4.5%, while legacy revenue slipped 8%.
The company added more than 41,000 high-speed Internet customers in the latest quarter and ended the period with about 5.9 million subscribers.
For the first quarter, CenturyLink sees revenue between $4.46 billion to $4.51 billion, below the $4.55 billion estimate from analysts polled by Thomson Reuters. It expects adjusted earnings for the quarter of 67 cents to 72 cents a share, while analysts projected 66 cents.
For 2013, CenturyLink forecast revenue between $18.1 billion to $18.3 billion and adjusted earnings of $2.50 to $2.70 a share. Analysts most recently estimated $18.22 billion and $2.64 a share, respectively.
The stock has climbed 7.5% over the past three months.
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