"Sell" Rating Sinks CenturyLink Before Earnings

Most traders are already skeptical on CTL shares

CenturyLink, Inc. (NYSE:CTL) is trading down 4.1% today at $13.11, after a bearish analyst note came through just before the company's post-close earnings release today. Guggenheim downgraded the shares to "sell" from "neutral," saying the company should consider suspending its dividend as margin pressure will begin to catch up with it.

Most analysts are already on the skeptical side with CTL, with nine of 12 handing out "hold" recommendations. Options traders are also positioned somewhat bearishly, based on the Schaeffer's put/call open interest ratio (SOIR) of 1.47, which ranks in the 84th annual percentile. In short, near-term options traders are unusually put-skewed.

Short interest remains high, too, accounting for almost two weeks' worth of buying power, based on average trading volumes. CTL had been putting pressure on bears in recent weeks, yesterday rising to its highest point since February, putting its 14-day Relative Strength Index (RSI) into overbought territory at 71.

What's more, the earnings history for CenturyLink favors the pessimists, since it's closed lower the day after reporting in four straight quarters. The options market is pricing in a 12.7% next-day swing for the shares, which would be more volatile than the two-year average post-earnings move of 8.8%.