Earnings Preview: Qwest to report 3rd-qtr results

Qwest Communications International Inc. is scheduled to report its third-quarter results on Wednesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Qwest's stock showed surprising resilience last winter as the S&P 500 kept sinking. But since May, Qwest shares not only missed out on broad rally, they've sunk.

Most stock investors look for growth opportunities, but Qwest operates in a shrinking industry. It provides local phone service in 14 states, but households are giving up landlines in favor of cable phones, or simply making do with cell phones. Qwest doesn't have a cell phone network of its own to benefit from growth in that area.

The strongest part of the company has been the division that sells communications services to the government and large businesses. It has posted minor revenue increases so far this year, despite the recession.

Qwest's high dividend yield, currently at 9 percent, provides a floor for the stock.

Qwest used to be the third-largest phone company in the nation by number of lines. But as of July 1, CenturyLink, the company formed by the combination of CenturyTel and Embarq, is the largest after AT&T Inc. and Verizon Communications Inc.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect Qwest to post earnings of 7 cents per share on $3.07 billion in revenue.

In the same quarter of 2008, Qwest earned $151 million, or 9 cents per share, on $3.38 billion in revenue.

COMPANY OUTLOOK: In July, Qwest modestly improved its earnings outlook for the year. The company now expects earnings before interest, taxes, depreciation and amortization between $4.25 billion and $4.4 billion. It had previously set the low end of the range at $4.2 billion.

WHAT'S AHEAD: There has been speculation that Qwest could start buying smaller phone companies, participating in consolidating the shrinking industry. But its high debt load and weak stock are obstacles.

Qwest hasn't applied for funds from the government's $7.2 billion broadband stimulus fund, passing on the chance to expand high-speed Internet access to underserved areas. Qwest said it couldn't make a business case for applying. However, there will be more rounds of funding, and the company could apply later.

To keep up with the offerings of cable companies like Comcast Corp., Qwest is doubling the top download speed it offers in some major cities to 40 megabits per second.

STOCK PERFORMANCE: Qwest shares fell 7.1 percent during the quarter, compared with a 14 percent rise for the S&P 500.