![]() The sell-side's consensus fiscal 2023 bottom line projection for Lumen Technologies was lowered by -21.9% in the last three months. The company's financial performance in the recent two quarters were poor, and the near-term outlook for LUMN isn't promising either. Prior to the second quarter of 2022, Lumen Technologies was able to register positive bottom line growth in YoY terms for nine quarters running between Q1 2020 and Q1 2022. The company's non-GAAP EPS decreased by -27.1% YoY and -71.4% YoY in Q2 2022 and Q3 2022, respectively. LUMN's actual Q3 2022 and Q2 2022 non-GAAP adjusted earnings per share or EPS came in -60.2% and -23.2%, respectively lower than the Wall Street analysts' consensus bottom line estimates. The key metrics for Lumen Technologies are its below-expectations earnings, and the changes in the consensus financial forecasts for the company. Subsequently, they became disappointed as Lumen Technologies decided to completely do away with dividends. Initially, investors were concerned that LUMN might lower its dividend payouts. In a nutshell, the market's expectations regarding LUMN's dividends have had a significant impact on Lumen Technologies' stock price performance in 2022. LUMN issued its Q3 2022 earnings press release on November 2, highlighting that it "eliminated the company's annual dividend." At its third quarter results briefing on the same day, Lumen Technologies also mentioned that the excess capital generated from the dividend omission will be allocated to its "growth plans", its "balance sheet", and "share repurchases." On Novemalone (the day after LUMN's dividend disclosure), Lumen Technologies' stock price fell by -17.7%. Investors' worst fears were confirmed at the beginning of November 2022. I also emphasized in my prior Octoarticle that "LUMN's shares might sink, if Lumen Technologies' future dividends were reduced significantly." Investor worries about the risk of Lumen Technologies cutting its future dividends started growing in the later part of the prior year. LUMN only began underperforming the S&P 500 in a significant manner after September 2022. It is important to note that Lumen Technologies' share price performance was tracking the broader market very closely for the first eight months of 2022. Lumen Technologies' 2022 Stock Price Performance LUMN's share price plunged by -58.9% last year as indicated in the chart below. Why Did Lumen Stock Drop So Much In 2022? Therefore, I upgrade my investment rating for Lumen from a Hold previously to a Buy now. But my target price of $7.52 for Lumen Technologies suggests that a meaningful recovery in its share price in 2023 is pretty achievable. I don't see LUMN's stock price surging to as high as $10 in the current year. With this latest article, I assess the chances of a meaningful share price recovery happening for LUMN in the near future. My earlier Octowrite-up for Lumen Technologies touched on the company's new CEO and CFO appointments, and its shareholder capital return expectations. I rate Lumen Technologies, Inc.'s ( NYSE: LUMN) stock as a Buy. ![]()
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