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Fiber-optic entity Qwest Communications (NYSE: Q), whose colleagues include Verizon (NYSE: VZ), AT&T (NYSE: T), and Sprint Nextel (NYSE: S), reported Q4 numbers on Tuesday. Revenues declined by 3%, and adjusted income came in at 12 cents per share, which, according to this article, beat estimates by two pennies.
Well, I have to say, I've been wrong about Qwest. When I last wrote about the tech company, I had a very bearish view. I think Qwest's stock gained a buck since that piece, which is like a huge percentage gain when you consider that the shares closed yesterday at $3.45. The market seems to be liking Qwest's prospects. Going back to that article I cited concerning the earnings beat, I see some positive opinion on Qwest's quarter. I'll agree, it wasn't bad, especially when the economy is considered. The company did well in terms of cash flow: cash from operations for the year was roughly flat while adjusted free cash flow came in at $1.4 billion.
However, I can't say that the run-up in the stock since my last piece has changed my opinion. Sure, Qwest beat earnings, it's striving to be efficient and to run a more streamlined operation, and it's got decent cash flow, but I think there is still too much risk with the company. The stock has been weak so far in 2009, and even though the year is young, I think this equity is going to see a lot of volatility. Remember that it will be very sensitive to macroeconomic moves. Steven Halpern highlighted an analyst's very bullish view on Qwest back in December. There's a belief out there that Qwest will either turnaround or perhaps be taken over at some point. My bearish view might be considered nothing more than short-term noise. Still, I just can't see committing capital to this low-priced/high-yield stock while the recession marches on. It remains a roll of the dice, in my opinion. It will be interesting to see how future quarters treat Qwest, but I'm happy to remain on the sidelines.
Disclosure: I don't own any company mentioned; positions can change without notice.
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