Centurylink (CTL) vs. Telephone & Data Systems (NYSE:TDS) Critical Review

Telephone & Data Systems (NYSE:TDS) and Centurylink (NYSE:CTL) are both utilities companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, analyst recommendations, risk and valuation.

Profitability

This table compares Telephone & Data Systems and Centurylink’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Telephone & Data Systems 3.00% 2.92% 1.55%
Centurylink -34.62% 6.89% 1.93%

Earnings & Valuation

This table compares Telephone & Data Systems and Centurylink’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Telephone & Data Systems $5.11 billion 0.68 $135.00 million $1.17 26.02
Centurylink $23.44 billion 0.49 -$1.73 billion $1.19 8.83

Telephone & Data Systems has higher earnings, but lower revenue than Centurylink. Centurylink is trading at a lower price-to-earnings ratio than Telephone & Data Systems, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

82.6% of Telephone & Data Systems shares are owned by institutional investors. Comparatively, 75.7% of Centurylink shares are owned by institutional investors. 14.3% of Telephone & Data Systems shares are owned by insiders. Comparatively, 0.5% of Centurylink shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Telephone & Data Systems pays an annual dividend of $0.66 per share and has a dividend yield of 2.2%. Centurylink pays an annual dividend of $1.00 per share and has a dividend yield of 9.5%. Telephone & Data Systems pays out 56.4% of its earnings in the form of a dividend. Centurylink pays out 84.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Telephone & Data Systems has raised its dividend for 44 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Telephone & Data Systems and Centurylink, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Telephone & Data Systems 1 0 3 0 2.50
Centurylink 4 8 3 0 1.93

Telephone & Data Systems presently has a consensus target price of $37.75, indicating a potential upside of 24.01%. Centurylink has a consensus target price of $16.96, indicating a potential upside of 61.37%. Given Centurylink’s higher possible upside, analysts plainly believe Centurylink is more favorable than Telephone & Data Systems.

Risk and Volatility

Telephone & Data Systems has a beta of 1, meaning that its stock price has a similar volatility profile to the S&P 500.Comparatively, Centurylink has a beta of 0.74, meaning that its stock price is 26% less volatile than the S&P 500.

Summary

Telephone & Data Systems beats Centurylink on 10 of the 16 factors compared between the two stocks.

About Telephone & Data Systems

Telephone and Data Systems, Inc., a telecommunications company, provides wireless, cable and wireline broadband, TV, voice, and hosted and managed services in the United States. It operates through three segments: U.S. Cellular, Wireline, and Cable. The company offers cellular services to postpaid and prepaid customers, including retail consumers, government entities, and small-to-mid-size business customers in industries, such as the construction, retail, agriculture, professional services, and real estate; and national plans with voice, messaging, and data usage options. It also provides wireless devices comprising handsets, tablets, mobile hotspots, home phones, and routers; accessories that include wireless essentials, which comprise cases, screen protectors, chargers, and memory cards, as well as various consumer electronics, such as headphones, smart speakers, wearables, and home automation products. In addition, the company offers telecommunications services to residential and commercial customers, as well as wholesale customers and wireless carriers; broadband and digital television (TV) video services; voice services comprising local and long-distance telephone, voice over Internet protocol (VoIP), find me follow me, collaboration, instant messaging, and other services; and network access services. Further, it provides business services, including data networking, Ethernet, broadband access, and VoIP services to small- and medium-sized businesses, as well as operates retail stores and kiosks. The company offers its services to approximately 6 million connections. It sells its products through retail sales, direct sales, third-party retailers, and independent agents, as well as through Website and telesales. The company was founded in 1968 and is headquartered in Chicago, Illinois.

About Centurylink

CenturyLink, Inc. provides various communications services to residential, business, wholesale, and governmental customers primarily in the United States. It operates in two segments, Business and Consumer. The company offers virtual private network data network services; Ethernet services; Internet protocol services; CenturyLink Prism TV that allows customers to watch television or cable channels and record up to four shows on one home digital video recorder; and Vyvx, which provides audio and video feeds over fiber or satellite for broadcast and production customers, as well as satellite digital television services. It also provides broadband services, which allow customers to connect to the Internet through their existing telephone lines or fiber-optic cables; private line solution for transmission of data between sites; colocation and data center services comprising cloud, hosting, and application management solutions; wavelength services that provide customers required bandwidth with an end-to-end transport solution of a bandwidth; and network security solutions, as well as sells telecommunications equipment and resells software, and provides network management, installation and maintenance of data equipment, and building of fiber-optic broadband networks. In addition, the company offers local calling services; long-distance and toll-free services; information technology (IT) services, such as transporting and delivering enterprise data and applications; and managed services consisting of network, hosting, cloud, and IT services. Further, it leases and subleases space in its office buildings, warehouses, and other properties. As of December 31, 2017, the company operated approximately 10.3 million total access lines; and served approximately 5.7 million broadband subscribers. CenturyLink, Inc. was founded in 1968 and is based in Monroe, Louisiana.

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