Reviewing Centurylink (CTL) and FairPoint Communications (FRP)

Centurylink (NYSE: CTL) and FairPoint Communications (NASDAQ:FRP) are both telecommunications services companies, but which is the better business? We will compare the two companies based on the strength of their valuation, risk, earnings, dividends, institutional ownership, profitability and analyst recommendations.

Analyst Ratings

This is a summary of current ratings and price targets for Centurylink and FairPoint Communications, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Centurylink 1 7 5 0 2.31
FairPoint Communications 0 1 0 0 2.00

Centurylink presently has a consensus price target of $21.67, indicating a potential upside of 18.98%. FairPoint Communications has a consensus price target of $17.00, indicating a potential upside of Infinity. Given FairPoint Communications’ higher probable upside, analysts clearly believe FairPoint Communications is more favorable than Centurylink.

Dividends

Centurylink pays an annual dividend of $2.16 per share and has a dividend yield of 11.9%. FairPoint Communications does not pay a dividend. Centurylink pays out 72.0% of its earnings in the form of a dividend.

Institutional & Insider Ownership

59.4% of Centurylink shares are owned by institutional investors. Comparatively, 88.6% of FairPoint Communications shares are owned by institutional investors. 0.6% of Centurylink shares are owned by company insiders. Comparatively, 7.6% of FairPoint Communications shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Centurylink and FairPoint Communications’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Centurylink 7.87% 5.88% 1.65%
FairPoint Communications -11.81% N/A -7.88%

Valuation & Earnings

This table compares Centurylink and FairPoint Communications’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Centurylink $17.66 billion 1.10 $1.39 billion $3.00 6.07
FairPoint Communications N/A N/A N/A $2.27 N/A

Centurylink has higher revenue and earnings than FairPoint Communications. FairPoint Communications is trading at a lower price-to-earnings ratio than Centurylink, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Centurylink has a beta of 0.82, meaning that its share price is 18% less volatile than the S&P 500. Comparatively, FairPoint Communications has a beta of 0.58, meaning that its share price is 42% less volatile than the S&P 500.

Summary

Centurylink beats FairPoint Communications on 9 of the 14 factors compared between the two stocks.

About Centurylink

CenturyLink, Inc. is an integrated communications company. The Company is engaged in providing an array of communications services to its residential and business customers. Its segments include Enterprise, which provides strategic, legacy and data integration products and services to small, medium and enterprise business, wholesale and governmental customers, including other communication providers, and Consumer, which provides strategic and legacy products and services to residential customers. Its communications services include local and long-distance voice, broadband, Multi-Protocol Label Switching (MPLS), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), data integration, video, network, public access, Voice over Internet Protocol (VoIP), information technology and other ancillary services.

About FairPoint Communications

FairPoint Communications, Inc. is a provider of data, voice and communications services to business, wholesale and residential customers within its service territories. The Company offers its customers a suite of services, such as Ethernet, Session Initiation Protocol Trunking (SIP-Trunking), hosted Primary Branch Exchange (hosted PBX), managed services, data center colocation services, high capacity data transport and other Internet protocol (IP)-based services over its fiber-based network. It also offers Internet access, high-speed data, and local and long distance voice services. It provides services, such as Data and Internet Services, which include optical, Ethernet, Ethernet virtual circuit technology for cellular backhaul and private line special access services. It offers Voice Services, which include Local Calling Services, Long Distance Services and 9-1-1 Services. It also offers Network Transport Services, Interstate Access Charges and Intrastate Access Charges.

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