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CenturyLink Shares Plunge 14% On 26% Dividend Cut, Q4 Results Miss Estimates

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Shares of CenturyLink, Inc. (CTL: Quote) plunged nearly 14 percent in expended trading on Wednesday after the telecommunications company reported results for the fourth quarter that missed analysts' expectation, and indicated its intention to slash quarterly dividend by 26%. The company also provided earnings guidance for the full-year 2013, well below Street view.

Meanwhile, the company reported a profit for the quarter that more than doubled from last year, reflecting lower operating expenses.

The company's board indicated its intention to lower quarterly dividend by 26 percent to $0.54 from $0.725 per share at its next regularly-scheduled meeting on February 26, 2013, with the change effective with the March 2013 quarterly dividend payment. The board also authorized the repurchase of up to $2.0 billion stock.

"We are pleased with our fourth quarter and full-year results, which reflect the continued execution of our strategy to focus on investing in our key growth drivers to further stabilize our top-line revenue while aligning our operating costs with revenue and growth opportunities," CEO Glen Post said in a statement.

The Monroe, Louisiana-based reported net income of $233 million or $0.37 per share for the fourth quarter, higher than $109 million or $0.18 per share in the prior-year quarter.

Excluding special items, adjusted net income for the quarter was $415 million or $0.67 per share, compared to $343 million or $0.55 per share in the year-ago quarter.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.68 per share for the quarter. Analysts' estimates typically exclude special items.

Operating revenues for quarter declined 1.5 percent to $4.58 billion from $4.65 billion in the same quarter last year, driven by lower legacy services revenues primarily due to the impact of access line losses and lower access revenues, but missed sixteen Wall Street analysts' consensus estimate of $4.59 billion by a whisker.

Strategic revenues for the quarter grew 4.5 percent to $2.12 billion, while legacy revenues declined 8.0 percent to $2.0 billion from the year-ago quarter.

Operating expenses for the quarter dropped 4.9 percent to $3.92 billion from the prior-year quarter, while operating income grew 25 percent to $666 million from last year, primarily due to lower personnel-related costs, professional fees and depreciation and amortization expense.

The company ended the fourth quarter with about 5.85 million high-speed Internet subscribers, adding more than 41,000 customers in the quarter. The company also added more than 10,000 CenturyLink PrismTM TV subscribers in fourth quarter, ending the quarter with nearly 115,000 subscribers in service.

For fiscal 2012, the company reported net income of $777 million or $1.25 per share, higher than $573 million or $1.07 per share in the prior year. Excluding items, adjusted net income was $1.66 billion or $2.67 per share. Revenues for the full year grew 19.7 percent to $18.38 billion from last year.

Street was looking for full-year 2012 earnings of $2.67 per share on annual revenues of $18.39 billion.

Looking forward to the first quarter, the company expects adjusted earnings in a range of $0.67 to $0.72 per share, and projected operating revenues between $4.46 billion and $4.51 billion. Analysts currently expect earnings of $0.66 per share on revenues of $4.55 billion for the quarter.

For fiscal 2013, CenturyLink anticipates adjusted earnings in the range of $2.50 to $2.70 per share, and projected operating revenues between $18.1 billion and $18.3 billion. Street is currently looking for fiscal 2013 earnings of $2.84 per share on annual revenues of $18.22 billion.

"We remain focused on delivering innovative communications and hosted IT solutions that meet the needs of customers, and we continue to expect further improvement in our top-line revenue trend this year and to reach revenue stabilization in 2014," Post added.

CTL closed Wednesday's regular trading session at $41.69, down $0.07 or 0.17% on a volume of 8.18 million shares. The stock plunged a further $5.64 or 13.53% in after-hours trading.

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by RTT Staff Writer

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