Lumen Technologies Stock Drops Amidst Declining Revenue and High Debt Obligations

Lumen Technologies' (LUMN) stock dropped 18.54% after the company's mixed earnings report and revenue decline. Despite efforts to improve, LUMN faces financial challenges with a debt-to-EBITDA ratio of 4.75 and a high P/B ratio of 12.95. The company's EBITDA margin is 29.02%, but the operating margin is only 3.98%. Investors are cautious, with a volatile beta of 1.72 and an Altman Z-score of -0.18, indicating financial distress.

Lumen Technologies (LUMN) reported mixed earnings for the second quarter of 2025, leading to a significant drop in its stock price. The company posted a quarterly loss of $0.03 per share, beating the Zacks Consensus Estimate of $0.24 per share [1]. This represents a surprising 87.50% improvement over the expected loss. Compared to the same quarter last year, Lumen reported a loss of $0.13 per share.

Revenue for the quarter ended June 2025 was $3.09 billion, down 5.4% from the same period last year and 1.06% below the Zacks Consensus Estimate of $3.13 billion [2]. This decline was driven by a 12.9% decrease in Mass Markets revenue and a 2.4% decrease in North American Enterprise revenue. However, the Public Sector segment showed strong growth of 8.2% year-over-year.

Lumen's strategic initiatives include the sale of its Consumer Fiber-to-the-Home (FTTH) business to AT&T for $5.75 billion, aimed at reducing leverage and sharpening its focus on enterprise services [3]. The company also highlighted its positioning as a backbone for AI infrastructure, emphasizing network expansion plans and partnerships with major cloud providers.

Despite these efforts, Lumen faces financial challenges. Its debt-to-EBITDA ratio stands at 4.75, and its P/B ratio is 12.95. The company's EBITDA margin is 29.02%, but its operating margin is only 3.98%. Investors are cautious, with a volatile beta of 1.72 and an Altman Z-score of -0.18, indicating financial distress.

The stock has lost about 16% since the beginning of the year, underperforming the S&P 500's gain of 8.2%. The company's earnings outlook remains uncertain, with a Zacks Rank of #3 (Hold), indicating that shares are expected to perform in line with the market in the near future [1].

References:
[1] https://finance.yahoo.com/news/lumen-lumn-reports-q2-loss-215502404.html
[2] https://www.nasdaq.com/articles/heres-what-key-metrics-tell-us-about-lumen-lumn-q2-earnings
[3] https://www.investing.com/news/company-news/lumen-q2-2025-presentation-att-deal-debt-reduction-highlight-strategic-shift-93CH-4164475