CenturyLink Secures DOI Task Order for Network Modernization

Zacks Equity Research

CenturyLink, Inc. CTL communicated that it has secured a task order, valued up to $1.6 billion, from the U.S. Department of the Interior (“DOI”) to deliver managed core network with upgraded and secured cloud services. The communications company’s share price increased 3.8% in yesterday’s trading session to close at $13.56.

Per the mini-contract, CenturyLink will provide cybersecurity and IT services that will be beneficial for the federal executive body in the management and conservation of the nation’s natural resources. The deal comprises two parts. The first being managed core network services like virtual private network and software-defined wide area network to design and operate the enterprise network infrastructure of DOI. The second is managed access services like delivering seamless WiFi connection and cloud connectivity with Managed Trusted Internet Protocol Services across 2,400 operating locations.

Monroe, LA-based CenturyLink has been recognized as the first supplier to function under General Services Administration's (GSA) 15-year, $50 billion Enterprise Infrastructure Solutions (EIS) program to substitute a network of expiring deals, thereby streamlining telecommunications infrastructure of the government. Moreover, the contract highlights CenturyLink’s edge over eight other telecom giants, namely Verizon Communications Inc. VZ, AT&T Inc. T, L3Harris Technologies, Inc. LHX, Granite Telecommunications LLC, BT Federal Inc., Core Technologies Inc., Manhattan Telecommunications and MicroTech.

The distribution contract for CenturyLink’s avant-garde network comes after the company struck a connectivity deal with NASA last year worth $10.5 million. The agreement, secured via GSA EIS program, emphasizes the regulatory body’s trust on CenturyLink to shift to an agile networking infrastructure that seamlessly integrate various technology platforms, applications and services. The connectivity agreement, which is expected to operate through 2032 (with 11 one-year options), will reduce network complexity and improve operational efficiency.

With more than 52,000 employees in 60 countries, CenturyLink is shifting focus from integration to transformation in order to fortify its position in the global market. It intends to transform its business operations through product evolution and digitizing of customer interactions, which portends well for top-line growth.

Also, the company aims to generate revenues in its business markets and believes the scale of its global assets alongside an innovative product portfolio to be accretive to earnings. Backed by enhanced broadband speed and fiber-based backhaul services, it expects its Managed Office and Managed Enterprise solutions to consistently gain traction and boost revenues driven by burgeoning digital demands from small and medium business customers.

It is focused on improving operational efficiencies through various methods, including network simplification and rationalization, which would aid in improving its end-to-end provisioning time and drive standardization. Strong network capabilities, integrated hosting and network solutions are likely to promote growth in its cloud business.

CenturyLink has a long-term earnings growth expectation of 7.4%. The stock has gained 18.9% compared with the industry’s rise of 7.2% in the past six months.

It currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CenturyLink is currently trading with a forward P/E of 9.07X. It topped earnings estimates thrice in the trailing four quarters, delivering an average beat of 8.8%.

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