Lumen (LUMN) saw its shares surge in the last session with trading volume being higher than average. The latest trend in earnings estimate revisions may not tra
Lumen LUMN shares rallied 8.8% in the last trading session to close at $6.95. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 6% loss over the past four weeks.
The increase in share price can be attributed to Lumen’s sharp AI pivot. Opportunities arising from the proliferation of AI are fueling demand for the Private Connectivity Fabric (“PCF”) solutions. Driven by significant AI-fueled connectivity demand, Lumen has secured a total of $13 billion in PCF deals at the end of the fourth quarter of 2025.
Beyond fiber, Lumen is building its network-as-a-service (NaaS) business, with its customer base exceeding 2000. Management remains upbeat about Internet on Demand, or IoD Offnet, and expects this solution to boost market reach with more than 900 off-net ports sold so far, as highlighted on the last earnings call.
Lumen remains upbeat about its connected ecosystem strategy (with over 16 ecosystem partners like Palantir $PLTR, Commvault and QTS), which is producing tangible results with more than 180 potential sales opportunities as highlighted on the fourth quarter earnings call.
At its Investor Day 2026, LUMN noted digital capabilities, including NaaS, Edge Solutions, Security and the Connected Ecosystem, to deliver between $500 million and $600 million of incremental revenues exiting 2028, and $800-$900 million by 2030. PCF business will yield $400-$500 million of recurring revenues exiting 2028 and $550-$650 million by 2030.
The company exceeded its 2025 cost-reduction target, achieving more than $400 million in run-rate savings. It now targets $700 million exiting 2026 and $1 billion by year-end 2027. This cost optimization, combined with improving revenue mix, underpins guidance for adjusted EBITDA of $3.1-$3.3 billion in 2026, with management expecting EBITDA to inflect growth this year.
Perhaps the most important development has been the company’s dedicated deleveraging efforts. The sale of Mass Markets' fiber-to-the-home business (including Quantum Fiber, across 11 states) to AT&T $T for $5.75 billion in cash marks a defining pivot. Management used cash on hand and $4.8 billion in net proceeds to fully retire super-priority bonds, thereby lowering annual cash interest expense by an additional $300 million. Total debt now reduced to less than $13 billion, down more than $5 billion since January 2025. Over the past 12 months, Lumen executed seven refinancing transactions totaling more than $11 billion.
Annual interest expense has been reduced by nearly $500 million in the past 12 months, unlocking massive cash flow gains. It also previously eliminated second-lien debt. The sale of the fiber-to-the-home business reduces annual capex by more than $1 billion, allowing Lumen to focus investment on enterprise and AI infrastructure.
This telecommunications is expected to post quarterly loss of $0.07 per share in its upcoming report, which represents a year-over-year change of +46.2%. Revenues are expected to be $2.84 billion, down 10.7% from the year-ago quarter.
Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.
For Lumen, the consensus EPS estimate for the quarter has been revised 40% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on LUMN going forward to see if this recent jump can turn into more strength down the road.
The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>
Lumen belongs to the Zacks Diversified Communication Services industry. Another stock from the same industry, Shenandoah Telecommunications SHEN, closed the last trading session 2.5% higher at $15.42. Over the past month, SHEN has returned 8.5%.
For Shenandoah Telecom, the consensus EPS estimate for the upcoming report has changed -4.3% over the past month to -$0.24. This represents a change of -26.3% from what the company reported a year ago. Shenandoah Telecom currently has a Zacks Rank of #4 (Sell).
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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