CTBB

We rate QWEST CORP (CTBB) as a Hold with a composite score of 50.2/100 at a current price of $19.70. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (81th percentile) and quality (44th percentile), which together account for the majority of the composite score. Offsetting weakness in value (25th percentile) and momentum (33th percentile) tempers our overall conviction. We assign a No Moat rating (33/100), Low uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; valuation compression risk if growth disappoints. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

QWEST CORP holds a top-quartile position (#0 of 50) within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 50.2/100 places it at rank #1988 in our full 7,333-stock universe. At N/A in market capitalization, QWEST CORP is a small-cap player in the Transportation, Communications, Electric, Gas, And Sanitary Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -15% combined with momentum at the 33th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 67% (+12.2pp vs sector) narrow to operating margins of 21% (+3.4pp vs sector) and net margins of 15.2%, yielding a gross-to-net conversion rate of 23%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $19.70, QWEST CORP is trading at a premium to fundamental value. Our value factor score of 25/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

Valuation multiples are not available for this company, which limits our ability to assess relative pricing. We rely more heavily on factor-based valuation signals in such cases.

We assign a Low uncertainty rating to QWEST CORP. The company exhibits strong financial stability with a beta of 0.42, conservative leverage (13% D/E), and a stability factor in the 81th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.42 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 81th percentile and quality factor at the 44th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 67% provide a buffer against cost pressures; conservative leverage (13% D/E) limits balance sheet risk; above-average stability (81th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate QWEST CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 6.0%, and the balance sheet is managed within acceptable parameters (D/E: 13%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; QWEST CORP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 8.09% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, QWEST CORP receives a Hold rating with a composite score of 50.2/100 (rank #1988 of 7,333). Our quantitative framework assigns a No Moat (33/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 43/100.

Our analysis supports a neutral stance on QWEST CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.