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Level 3 Communications (LVLT) Q3 Earnings Lag Estimates
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Level 3 Communications Inc. reported weak financial results in the third quarter of 2016 wherein both the top and the bottom line missed the Zacks Consensus Estimate.
Level 3 Communications operates in a highly competitive enterprise communications market. In North America, the company competes with telecom giants like Verizon Communications Inc. (VZ - Free Report) and AT&T Inc. (T - Free Report) and with Telefonica, Orange and BT Group plc in Europe and Latin America.
On a GAAP basis, net income in the reported quarter was $143 million or 40 cents per share versus $1 million in the third quarter of 2015. Moreover, quarterly adjusted earnings per share of 39 cents lagged the Zacks Consensus Estimate of 44 cents.
Third-quarter total revenue was $2,033 million, down 1.4% year over year and also below the Zacks Consensus Estimate of $2,074 million.
Segment-wise, Core Network Services (CNS) revenues came in at $1,930 million, down 0.77% year over year. Wholesale Voice Services and Other revenues totaled $103 million, down 11.96% year over year.
Geographically, North America generated $1,572 million in CNS revenues, up 1.35% year over year. Europe, the Middle East and Africa accounted for $182 million of revenues at CNS, down 13.74% while Latin America contributed $176 million, down 3.83%.
Total operating expenses in the reported quarter were $1,679 million, down 3.23% year over year. Operating income came in at $354 million, up 8.26%. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was up 8.98% to $716 million. Adjusted EBITDA margin expanded to 35.2% from 31.9% in the prior-year quarter.
In the third quarter of 2016, Level 3 Communications generated $645 million of cash from operations compared with $575 million in the year-ago quarter. Free cash flow, in the reported quarter, was $281 million compared with $247 million in the prior-year quarter.
At the end of the third quarter of 2016, the company had $1,569 million of cash and cash equivalents and $10,882 million of outstanding debt compared with $691 million and $10,886 million, respectively, at the third quarter end of 2015. Meanwhile, the debt-to-capitalization ratio was 0.44 compared with 0.52 at the third quarter end of 2015.
Guidance
For 2016, Level 3 Communications expects adjusted EBITDA growth of 10% to 12% on a year-over-year basis. Free cash flow is estimated in the range of $1 billion to $1.1 billion.
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Level 3 Communications (LVLT) Q3 Earnings Lag Estimates
Level 3 Communications Inc. reported weak financial results in the third quarter of 2016 wherein both the top and the bottom line missed the Zacks Consensus Estimate.
Level 3 Communications operates in a highly competitive enterprise communications market. In North America, the company competes with telecom giants like Verizon Communications Inc. (VZ - Free Report) and AT&T Inc. (T - Free Report) and with Telefonica, Orange and BT Group plc in Europe and Latin America.
On a GAAP basis, net income in the reported quarter was $143 million or 40 cents per share versus $1 million in the third quarter of 2015. Moreover, quarterly adjusted earnings per share of 39 cents lagged the Zacks Consensus Estimate of 44 cents.
Third-quarter total revenue was $2,033 million, down 1.4% year over year and also below the Zacks Consensus Estimate of $2,074 million.
Segment-wise, Core Network Services (CNS) revenues came in at $1,930 million, down 0.77% year over year. Wholesale Voice Services and Other revenues totaled $103 million, down 11.96% year over year.
Geographically, North America generated $1,572 million in CNS revenues, up 1.35% year over year. Europe, the Middle East and Africa accounted for $182 million of revenues at CNS, down 13.74% while Latin America contributed $176 million, down 3.83%.
Total operating expenses in the reported quarter were $1,679 million, down 3.23% year over year. Operating income came in at $354 million, up 8.26%. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was up 8.98% to $716 million. Adjusted EBITDA margin expanded to 35.2% from 31.9% in the prior-year quarter.
In the third quarter of 2016, Level 3 Communications generated $645 million of cash from operations compared with $575 million in the year-ago quarter. Free cash flow, in the reported quarter, was $281 million compared with $247 million in the prior-year quarter.
At the end of the third quarter of 2016, the company had $1,569 million of cash and cash equivalents and $10,882 million of outstanding debt compared with $691 million and $10,886 million, respectively, at the third quarter end of 2015. Meanwhile, the debt-to-capitalization ratio was 0.44 compared with 0.52 at the third quarter end of 2015.
Guidance
For 2016, Level 3 Communications expects adjusted EBITDA growth of 10% to 12% on a year-over-year basis. Free cash flow is estimated in the range of $1 billion to $1.1 billion.
LEVEL 3 COMM Price, Consensus and EPS Surprise
LEVEL 3 COMM Price, Consensus and EPS Surprise | LEVEL 3 COMM Quote
Level 3 Communications has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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