Earnings Preview: Struggling Qwest to report 2Q

NEW YORK — Qwest Communications International Inc. is scheduled to report second-quarter financial results on Wednesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Denver-based Qwest’s largest business, local phone service in 14 states, isn’t exactly a healthy one, given that households are giving up landlines in favor of cable phones, or simply making do with cell phones.

Another unit carries long-haul voice and data traffic. That hasn’t been a good business to be in either, because a glut of capacity has kept prices low.

A third division sells communications services to the government and large businesses. It’s doing somewhat better, even eking out a revenue increase in the first quarter, despite the recession.

Overall, Qwest’s revenue is shrinking even as it’s weighed down by a heavy debt load. It’s cutting jobs. But a shrinking business doesn’t necessarily make Qwest shares a bad investment. The shares have outperformed the S&P 500 and those of bigger phone companies AT&T Inc. and Verizon Communications Inc. They’ve done particularly well since the November meltdown in the stock market, rising 50 percent. The shares also carry a high dividend yield, currently at 8 percent.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect Qwest to post earnings of 10 cents per share on $3.14 billion in revenue.

In the same quarter of 2008, Qwest earned $188 million, or 11 cents per share.

COMPANY OUTLOOK: In April, Qwest said it was sticking to its 2009 projections, still expecting earnings before interest, taxes, depreciation and amortization to be $4.2 billion to $4.4 billion this year.

WHAT’S AHEAD: To keep up with the offerings of cable companies like Comcast Corp., Qwest recently doubled the top download speed it’s offering in some major cities, to 40 megabits per second. It will extend the reach of that service during the year.

Qwest has indicated that it’s interested in participating in the government’s $7.2 billion broadband stimulus program, potentially taking money to offer high-speed Internet service in remote, unserved areas.

STOCK PERFORMANCE: Qwest shares rose 7.5 percent during the quarter, compared with 13 percent for the S&P 500.