Is Lumen Technologies, Inc. (LUMN) a Buy It Now?
Lumen (LUMN) has been one of the most searched stocks on Zacks.com lately. So, you might want to consider some of the facts that could shape the stock’s performance in the short term.
Shares of this forged and stamped metal have returned -0.6% over the past month compared to the +4.7% change in the Zacks S&P 500 composite. Zacks’ technology services industry, to which Lumen belongs , gained 4.5% over this period. Now the key question is: where could the stock be heading in the near term?
While press releases or rumors about a substantial change in a company’s trading outlook usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.
Revisions to earnings estimates
Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
We basically look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest trading trends. And if earnings estimates increase for a company, the fair value of its shares increases. A higher fair value than the current market price stimulates investors’ interest in buying the stock, causing its price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Lumen is expected to post earnings of $0.36 per share for the current quarter, representing a year-over-year change of -26.5%. Over the past 30 days, the Zacks consensus estimate has changed by -3.8%.
For the current year, the consensus earnings estimate of $1.66 indicates a change of -13.1% from the prior year. Over the last 30 days, this estimate has changed by -3.4%.
For the next fiscal year, the consensus earnings estimate of $1.06 indicates a change of -36% from what Lumen is expected to earn a year ago. Over the past month, the estimate has changed by -9.3%.
With an impressive externally audited track record, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance, as it effectively harnesses the power of earnings estimate revisions. . The magnitude of the recent shift in the consensus estimate, along with three other factors related to earnings estimates, resulted in a Zacks No. 3 (hold) ranking for Lumen.
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Expected revenue growth
Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase its revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a company.
For Lumen, the consensus sales estimate for the current quarter of $4.43 billion indicates a year-over-year change of -9.3%. For the current and next fiscal year, the estimates of $17.87 billion and $15.91 billion indicate variations of -9.2% and -11%, respectively.
Latest reported results and history of surprises
Lumen reported revenue of $4.61 billion in the last reported quarter, representing a year-over-year change of -6.3%. EPS of $0.35 for the same period versus $0.48 a year ago.
Compared to the Zacks consensus estimate of $4.6 billion, reported revenue is a surprise +0.33%. The EPS surprise was -23.91%.
In the past four quarters, Lumen has exceeded consensus EPS estimates twice. The company exceeded consensus revenue estimates only once during this period.
No investment decision can be effective without considering the valuation of a stock. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a key determinant of its future price performance.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on.), which is useful in determining whether a stock is overvalued, correctly valued, or temporarily undervalued.
Lumen is rated A on this front, indicating that it is trading at a discount to its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information on Zacks.com might help determine whether it’s worth paying attention to the market buzz about Lumen. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.
This Little-Known Semiconductor Stock Could Bring Big Gains to Your Portfolio
The importance of semiconductors cannot be overstated. Your smartphone couldn’t work without it. Your personal computer would crash in minutes. Digital cameras, washing machines, refrigerators, ovens. You wouldn’t be able to use any of them without semiconductors.
Supply chain disruptions have given semiconductors enormous pricing power. This is why they present a tremendous opportunity for investors.
And today, in a new free report, Zacks’ top stock market strategist reveals the single semiconductor stock with the most to gain. It’s yours for free and without obligation. >> Give me access to my free special report.
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
Lumen Technologies, Inc. (LUMN): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.