Earnings Preview: CenturyLink Buys Growth

If you insist on serving organic broccoli, this report probably isn't for you. There's nothing organic about this growth story.

When CenturyLink (NYS: CTL) reports fourth-quarter results this Wednesday, it won't be your daddy's CenturyLink. Thanks to an aggressive campaign of acquisitions, year-over-year and long-term comparisons to the company's past are nearly meaningless.

The third-largest telecom in the U.S. got this big by merging with Qwest Communications last spring. Then, CenturyLink added a large dose of business-class muscle by buying data center operator SAVVIS over the summer. So when CenturyLink reported results for the third quarter, sales had exploded by 162% year-over-year and cash flows more than doubled.

In the fourth quarter, management guided to sales just above $4.6 billion and about $1.9 billion in free cash flows. Adjusted earnings should land at $0.60 per diluted share, give or take a couple of pennies. About half of the free cash goes right back into powering the company's generous 7.6% dividend yield.

Wall Street toes the official guidance line, expecting earnings of $0.61 per share on $4.6 billion in revenue. Then again, CenturyLink has consistently crushed analyst earnings targets throughout this buyout binge.

Any surprises here would come from better or worse progress than expected in integrating those massive buyouts. Holiday quarters don't matter much for this stodgy wireline specialist. Like fellow copper-and-fiber operator Frontier Communications (NYS: FTR) , CenturyLink fuels massive dividends with ultra-reliable subscription sales. The smartphone revolution is not a factor for these guys, though CenturyLink did sign a deal to resell Verizon (NYS: VZ) wireless plans last year.

Just don't call this company Luddite -- through the SAVVIS deal, CenturyLink draws a bead on the booming market for enterprise-class cloud services. In this earnings call, I want to hear that the company is cross-selling those products to a much larger captive audience than SAVVIS could have managed on its own, and that the tactic is getting traction.

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At the time thisarticle was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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