Lumen Technologies (LUMN -28.08%) stock is plummeting on the heels of its recent third-quarter earnings release. The company’s share price was down 27.4% as of 1:30 p.m. ET, according to data from S&P Global Market Intelligence.
Lumen published its Q3 results after the market closed yesterday, reporting earnings for the period that fell short of Wall Street’s expectations. While sales for the period did come in higher than anticipated, investors are seeing worrying signs in the company’s latest report and financing moves.
Lumen’s earnings miss isn’t the only thing shocking investors
Lumen posted a non-GAAP (adjusted) loss of $0.09 per share on revenue of $3.64 billion in the third quarter. Meanwhile, the average analyst estimate had called for an adjusted profit of $0.06 per share on revenue of approximately $3.61 billion. While sales did come in roughly $30 million higher than the midpoint analyst target, revenue for the period was still down roughly 17% year over year.
In conjunction with the earnings release, Lumen also announced a major financing move. The company published a press release yesterday stating that it had reached an agreement with creditors who held over $7 billion worth of the company’s debt. Per the deal, a large portion of the outstanding debt will now come due at a later date and potential issues with Lumen’s compliance with debt covenants will be remedied. The group of creditors will also provide $1.2 billion in new financing.
Is Lumen stock a buy?
With today’s pullback, Lumen stock has lost roughly 80% of its value year to date. It trades at roughly 3.7 times this year’s expected earnings and less than 8% of this year’s expected sales.
While the telecom looks cheaply valued by some metrics, it’s uncertain whether its turnaround initiatives will be successful. With the company pushing credit maturities further out and taking on new debt, its interest expenses will likely continue to climb. If the business can make significant progress toward management’s long-term performance targets, shares could rebound well above current levels. But with recent business performance and a complicated financial structure, the stock is a risky proposition despite trading at low multiples.
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