Contents
TLDR
- Lumen Technologies (LUMN) stock rocketed 29.2% Friday after a brutal post-earnings selloff, fueled by CEO Kate Johnson’s $500,000 share purchase.
- Johnson bought 78,685 shares at $6.35 Thursday, a day after the stock plunged 17% following quarterly results that disappointed investors.
- The company reported fourth-quarter earnings that beat estimates but revenue only met expectations, with cash flow guidance of $1.2-$1.4 billion.
- Lumen sold its consumer fiber business to AT&T for $4.8 billion, cutting debt to 3.8 times EBITDA while refocusing on enterprise customers.
- Growth products now account for 47% of enterprise revenue and expanded 7% last year, though overall revenue dropped 9.5% due to legacy product declines.
Lumen Technologies stock exploded 29.2% higher Friday after CEO Kate Johnson stepped up to buy shares during the week’s brutal selloff. Her half-million-dollar purchase sent a powerful message to the market.
Lumen Technologies, Inc., LUMN
Johnson bought 78,685 shares Thursday at an average price of $6.35 per share. The timing couldn’t have been better as the stock reversed course the very next day.
The telecom stock had crashed 17% Wednesday following Tuesday’s fourth-quarter earnings release. Investors weren’t impressed despite earnings beating Wall Street forecasts.
Johnson’s $500,000 purchase boosted her total holdings by roughly 6.8%. That’s a meaningful personal investment for any executive.
Mixed Earnings Drive Volatility
Lumen’s adjusted fourth-quarter earnings per share topped analyst estimates. But revenue just matched expectations, leaving bulls wanting more.
Full-year free cash flow guidance came in at $1.2 billion to $1.4 billion. The catch? That range includes $300 million to $450 million in one-time tax refunds.
The company keeps bleeding revenue and adjusted EBITDA. Legacy products continue their slow decline as customers migrate to newer technologies.
But there’s a silver lining in the numbers. Lumen’s newer products now generate about 47% of enterprise revenue.
These growth products jumped 7% last year. Unfortunately, that wasn’t enough to offset legacy declines that pulled total revenue down 9.5%.
Balance Sheet Gets Cleaner
Lumen closed a game-changing deal by selling its consumer fiber-to-the-home unit to AT&T. The $4.8 billion transaction gave management breathing room on debt.
The company’s debt now sits just under 3.8 times EBITDA. That’s an improvement from prior years but still elevated by most standards.
Management is now laser-focused on enterprise customers after exiting the consumer business. The strategic shift aligns with where Lumen sees growth opportunities.
The stock trades at 6.4 times projected free cash flow. That looks cheap for a company generating positive cash.
CEO Bets on Turnaround
Johnson’s insider purchase suggests she believes the turnaround is taking hold. Her AI networking solutions need to win customers for the strategy to pay off.
Revenue and profit growth remain elusive for now. The market won’t reward the stock with a higher valuation until those metrics flip positive.
Shares closed Friday at $8.06 after the massive rally. The stock still trades below its $11.95 52-week high but well above the $3.01 low.
Johnson increased her stake right after the earnings dump. She bought at $6.35 and watched the stock climb past $8 within 24 hours.
The CEO’s confidence play worked perfectly in the short term. Whether it pays off long-term depends on execution of the enterprise strategy and traction for new products.
