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Lumen (LUMN) Stock Soars 236% YTD: Will the Rally Continue?
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Lumen Technologies (LUMN - Free Report) shares have skyrocketed 236% year to date (YTD) compared with the S&P 500 composite and sub-industry’s growth of 17.4% and 18.7%, respectively.
What Caused the Surge?
A string of recent positive developments contributed significantly to the stock price surge.
Image Source: Zacks Investment Research
On Aug 5, Lumen announced that it has secured $5 billion in new business deals attributed to significant AI-fueled connectivity demand. Additionally, the company is actively negotiating with its customers to secure another $7 billion in sales opportunities to meet growing customer needs.
As AI needs surge, large companies across various industries are urgently seeking fiber capacity, which is becoming highly valuable and potentially scarce.
Before that, in July 2024, Lumen teamed up with Microsoft to boost its enterprise-wide digital transformation through the latter’s cloud and AI technologies.
Also, Microsoft chose Lumen to enhance its network capacity and support the development of next-generation applications for the company’s global platform customers.
Lumen secured its largest cable purchase agreement with Corning Incorporated, which will ensure 10% of Corning’s global fiber capacity for Lumen in the next two years, advancing AI capabilities for cloud data centers, enterprises and public agencies.
Lumen has also established a new Custom Networks division to oversee its Private Connectivity Fabric solutions. This division will also address rising interest from hyperscalers and other large organizations. The Lumen Private Connectivity Fabric enables users to create a custom network architecture designed to meet the demands of AI with the necessary flexibility, scalability and security.
This new division will offer tailored network solutions, including dark fiber, custom fiber routes and digital services, to securely connect data centers, safeguard data and support AI-intensive workloads.
Second-Quarter Results
The company reported its second-quarter 2024 results wherein revenues marginally beat the beat the Zacks Consensus Estimate. On a year-over-year basis, revenues of $3.268 billion declined 10.7%.
Public Sector revenues were improved 8% to $448 million. It expects the public sector to be the first segment to witness sustainable growth later this year, followed by mid-market and then large enterprise segments.
Adjusted loss (excluding special items) of 13 cents per share was wider than the Zacks Consensus Estimate of a loss of 9 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 10 cents.
For 2024, free cash flow is now projected to be between $1 billion and $1.2 billion. Earlier, the company expected free cash flow in the range of $100-$300 million.
$1 Billion in Cost Cuts
Lumen is working on achieving $1 billion in cost savings by the end of 2027 through planned infrastructure simplification across the network, product portfolio and IT. It is looking to integrate the network across all four different architectures by engineering them into one simplified standardized network fabric. This integration will also aid in product portfolio simplification. Management expects to significantly reduce the product count from thousands of product codes to a target of nearly 300.
Headwinds Persist
Stiff competition in the AI space could impede this Zacks Rank #3 (Hold) company’s efforts to secure new business deals.
It also lowered EBITDA guidance for the current year. Lumen now expects adjusted EBITDA in the band of $3.9-$4 billion compared with the earlier guided range of $$4.1-$4.3 billion.
Enabled by an improved liquidity profile, Lumen added that it was looking to pull forward certain expenses from 2026 and 2027 to 2025. It expects 2025 EBITDA to come in below 2024 levels owing to the investments in transformation and costs associated with recent PCF sales and legacy revenue declines. LUMN expects EBITDA to significantly rebound in 2026 and register growth thereafter.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $4.06, up 4.4% in the past 30 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.9%. The long-term earnings growth rate is 17.9%. Its shares have risen 25.9% in the past year.
The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.72, up 3.7% in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing once, with the average surprise being 4.8%. Its shares have risen 10.1% in the past year.
The Zacks Consensus Estimate for MANH’s 2024 EPS is pegged at $4.26. MANH’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 26.6%. The stock has surged 35.3% in the past year.
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Lumen (LUMN) Stock Soars 236% YTD: Will the Rally Continue?
Lumen Technologies (LUMN - Free Report) shares have skyrocketed 236% year to date (YTD) compared with the S&P 500 composite and sub-industry’s growth of 17.4% and 18.7%, respectively.
What Caused the Surge?
A string of recent positive developments contributed significantly to the stock price surge.
Image Source: Zacks Investment Research
On Aug 5, Lumen announced that it has secured $5 billion in new business deals attributed to significant AI-fueled connectivity demand. Additionally, the company is actively negotiating with its customers to secure another $7 billion in sales opportunities to meet growing customer needs.
As AI needs surge, large companies across various industries are urgently seeking fiber capacity, which is becoming highly valuable and potentially scarce.
Before that, in July 2024, Lumen teamed up with Microsoft to boost its enterprise-wide digital transformation through the latter’s cloud and AI technologies.
Also, Microsoft chose Lumen to enhance its network capacity and support the development of next-generation applications for the company’s global platform customers.
Lumen secured its largest cable purchase agreement with Corning Incorporated, which will ensure 10% of Corning’s global fiber capacity for Lumen in the next two years, advancing AI capabilities for cloud data centers, enterprises and public agencies.
Lumen has also established a new Custom Networks division to oversee its Private Connectivity Fabric solutions. This division will also address rising interest from hyperscalers and other large organizations. The Lumen Private Connectivity Fabric enables users to create a custom network architecture designed to meet the demands of AI with the necessary flexibility, scalability and security.
This new division will offer tailored network solutions, including dark fiber, custom fiber routes and digital services, to securely connect data centers, safeguard data and support AI-intensive workloads.
Second-Quarter Results
The company reported its second-quarter 2024 results wherein revenues marginally beat the beat the Zacks Consensus Estimate. On a year-over-year basis, revenues of $3.268 billion declined 10.7%.
Public Sector revenues were improved 8% to $448 million. It expects the public sector to be the first segment to witness sustainable growth later this year, followed by mid-market and then large enterprise segments.
Adjusted loss (excluding special items) of 13 cents per share was wider than the Zacks Consensus Estimate of a loss of 9 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 10 cents.
For 2024, free cash flow is now projected to be between $1 billion and $1.2 billion. Earlier, the company expected free cash flow in the range of $100-$300 million.
$1 Billion in Cost Cuts
Lumen is working on achieving $1 billion in cost savings by the end of 2027 through planned infrastructure simplification across the network, product portfolio and IT. It is looking to integrate the network across all four different architectures by engineering them into one simplified standardized network fabric. This integration will also aid in product portfolio simplification. Management expects to significantly reduce the product count from thousands of product codes to a target of nearly 300.
Headwinds Persist
Stiff competition in the AI space could impede this Zacks Rank #3 (Hold) company’s efforts to secure new business deals.
It also lowered EBITDA guidance for the current year. Lumen now expects adjusted EBITDA in the band of $3.9-$4 billion compared with the earlier guided range of $$4.1-$4.3 billion.
Enabled by an improved liquidity profile, Lumen added that it was looking to pull forward certain expenses from 2026 and 2027 to 2025. It expects 2025 EBITDA to come in below 2024 levels owing to the investments in transformation and costs associated with recent PCF sales and legacy revenue declines. LUMN expects EBITDA to significantly rebound in 2026 and register growth thereafter.
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Badger Meter (BMI - Free Report) , Manhattan Associates (MANH - Free Report) and ANSYS (ANSS - Free Report) . Badger Meter and Manhattan Associates sport a Zacks Rank #1 (Strong Buy) each, while ANSYS carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $4.06, up 4.4% in the past 30 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.9%. The long-term earnings growth rate is 17.9%. Its shares have risen 25.9% in the past year.
The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.72, up 3.7% in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing once, with the average surprise being 4.8%. Its shares have risen 10.1% in the past year.
The Zacks Consensus Estimate for MANH’s 2024 EPS is pegged at $4.26. MANH’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 26.6%. The stock has surged 35.3% in the past year.