Broadband service provider
Lumen Technologies NADSAQ: LUMN stock has been steadily trying to reverse a multi-year downtrend and may finally be
turning the corner. The
pandemic may have bolstered
consumer traffic, it hit enterprise services hard. However, the
COVID-19 vaccine rollouts will help accelerate a return to (the new) normal in which enterprise and work-from-home are fused to optimize efficiencies. The Company is showing an improvement and has been paying down debt as it sets path on a steady recovery in 2021. The stock also pays a solid 8% dividend which helps to buffer volatility. Prudent investors looking for a turnaround recovery play on the return to normal narrative can monitor shares of Lumen for opportunistic pullback levels.
Q4 2020 Earnings Release
On Feb. 10, 2021, Lumen released its fiscal four-quarter 2020 earnings report for the quarter ending in December 2020. The Company reported an earnings-per-share (EPS) profit of $0.48, excluding non-recurring items, versus consensus analyst estimates for $0.30, an $0.18 beat. Revenues fell (-3.4%) year-over-year (YoY) to $5.13 billion beating consensus analyst estimates for $5.12 billion. The Company achieved an annual run rate savings of $830 million in the quarter.
Conference Call Takeaways
Lumen CEO, Jeff Storey, set the tone, “Our foundation for future growth comes from our investment in the Lumen edge cloud infrastructure, expanding fiber for enterprises, and deploying new in-build technology for greater security service resilience and speed of delivery. And increasing the number of gigabit enabled consumer customers.” The Company added 400,000 homes for a total of 2.4 million homes using Quantum Fiber brand. Lumen operates one of the largest internet backbones with direct fiber connectivity to over 2,200 global data centers with “tremendous” scalable capacity. CEO Storey discussed the Lumen platform which was a culmination of efforts to integrated digital transformation, “The Lumen platform has the scale, security, ubiquity and resilience necessary to meet the needs of the fourth industrial revolution.” He summed it up, “With this network-as-a-service approach, our customers can add capacity as needed, enabling instantaneous consumption of additional network services. This contrasts with the old model of interacting with a salesperson scheduling the service delivery timeline and rolling jobs.” The Company will be launching new products like Lumen Edge Bare Metal, Lumen Edge Private Cloud, Lumen Edge VN and in the expansion of locations enabling customers to leverage Lumen to enhance applications with low latency.
Full-Year 2021 Guidance
The Company expects full-year 2021 adjusted EBITDA in a range from $8.4 billion to $8.6 billion. Long-term debt to EBITDA ratio fell to 3.6. Starting next quarter, the Company will report two segments, Business and Mass Market. The Business comprised of International and Global, Large Enterprise, Mid-Market and Wholesale. The Mass Market segment will comprise of Consumer and Small Business Group. For full-year 2020, the Company saw a (-6.2%) decrease in IGAM and Enterprise due to the pandemic. Turnaround plans for SMB was impacted by the pandemic. The improvement of economic growth and return to normal should see these segments improve, with the exception of Wholesale. The Company generated $3.131 billion free cash flow and $1.004 billion in Q4. Capex for full-year 2021 is expected in the range of $3.5 billion to $3.8 billion dedicated to investment in growth components like compute and application, IP and data and fiber infrastructure services. Prudent investors seeking a steady turnaround play can monitor shares for opportunistic pullback levels to build a position.
LUMN Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provides a full view of the price action playing field for LUMN stock. The monthly rifle chart is trying to reverse a multi-year downtrend as the 5-period moving average (MA) at the $10.63 Fibonacci (fib) level attempts to cross up through the 15-period MA at $10.83. The monthly stochastic is driving the crossover attempt with a mini pup. The weekly rifle chart formed a fast peak and pullback off $16.60 highs to immediately cross the weekly stochastic down. However, the moving averages are still in an uptrend with a stalled 5-period MA at $11.90 and rising 15-period MA at $10.82. The weekly market structure low (MSL) triggered above $9.74 but also formed a market structure high (MSH) sell trigger under $11.23. Prudent investors can watch for opportunistic pullback levels at the $11.30 fib, $10.65 fib, $9.97 fib, and the $9.12 fib. The upside trajectories range from the $13.38 fib up to the $17.69 fib level.
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