![]() On an adjusted basis, revenue declined 3.4% in the second quarter, an improvement from the 5.5% adjusted year-over-year decline in the first quarter of this year. That obviously did not happen and the results were worse than Q2-2022 where LUMN had noted the mild improvement over Q1-2022. After all, inflation is a huge tailwind for at least nominal metrics like revenues. Many had hoped that adjusted revenues would flatten out year over year, or even rise. Adjusted for extraordinary events and currency headwinds, total revenue was down 4.3% year over year and 2% quarter over quarter. But this quarter was definitely unusual from that standpoint, and we sympathize with the problems the company had. If you go overseas, that is part of the game. We should generally not be forgiving if management blames currency strength or weakness for weak results. Other factors that weighed heavily were the end of the Connect America Fund II (CAF-II) program and extreme currency headwinds. There were quite a few components to this and it is hard to gauge this relative to analyst expectations as the Latin America divestiture was completed in the middle of the quarter. We have highlighted the key numbers to focus on below. That said, LUMN's Q3-2022 numbers were really weak. So it is not surprising to see capex pullback from businesses. Keep in mind that official real GDP metrics fell in Q1 and Q2 of this year. We look at the Q3-2022 results and see how that changes our thesis. ![]() So, we have that going for us, which is nice. Most of Lumen bonds are down about 10-14% net of interest accrued so one can hardly declare that a victory. We rate the bonds a buy (yes, the 2042 bonds with a 10% YTM was what the title was referencing) and have a hold rating on the stock. Interest coverage should be close to 5X and if you like the 2X dividend coverage, you should love the 5X interest coverage. We think that is an extraordinarily low hurdle to clear. With a debt to EBITDA of close to 3.2X, when all the smoke has cleared, you have to only believe that the entire company is worth more than 3.2X EBITDA to consider these bonds. ( NYSE: LUMN) we had a neutral outlook for the stock and deferred our bullish tendencies to the bonds. When we last covered Lumen Technologies Inc. Lumen's dividend cut will be a budget buster. ![]() ![]() I need to switch to an energy efficient bulb. ![]()
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