Macquarie Sees $41 Price for CenturyLink (CTL) in SOTP Analysis

Macquarie analyst, Kevin Smithen, believes CenturyLink's (NYSE: CTL) board is becoming more flexible in its thinking and is entertaining new ways to generate shareholder value including the unwinding of the Savvis acquisition, a two year extension to bonus depreciation, debt paydown and colocation sale.

The two-year extension to bonus depreciation is expected to create $400m per year in additional FCF) and potentially >$1bln in excess proceeds (after debt paydown) from the colo sale should support the dividend and share buyback thru 2017.

However, he sees the real upside coming from a potential structural separation of CTL's consumer businesses.

He maintained his $37 price target today but sees a sum of the parts (SOTP) valuation of $41 if you attribute a 4x multiple to CTL's legacy businesses and use a discount to recent private market multiples on enterprise and consumer broadband businesses. No change to Outperform rating.

For an analyst ratings summary and ratings history on CenturyLink, Inc. click here. For more ratings news on CenturyLink, Inc. click here.

Shares of CenturyLink, Inc. closed at $28.57 yesterday.

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