A month has gone by since the last earnings report for Level 3 Communications, Inc. . Shares have lost about 3.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Level 3 Communications Q4 Earnings Top, Revenues Lag
On a GAAP basis, net income in the reported quarter was $250 million or $0.70 per share compared with $3,323 million or $9.33 in the year-ago quarter. However, quarterly adjusted earnings per share of $0.60 surpassed the Zacks Consensus Estimate of $0.44.
Fourth-quarter total revenue was $2,032 million, down 1% year over year and below the Zacks Consensus Estimate of $2,065 million.
Segment-wise, Core Network Services (CNS) revenues came in at $1,934 million, down 0.5% year over year. Wholesale Voice Services and Other revenues totaled $98 million, down 10.9% year over year.
Geographically, North America generated $1,584 million in CNS revenues, up 1% year over year. Europe, the Middle East and Africa accounted for $180 million of revenues at CNS, down 15% while Latin America contributed $170 million, up 7%.
Total operating expenses in the reported quarter were $1,678 million, down 2.2% year over year. Operating income came in at $354 million, up 4.7%. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was up 4.1% to $709 million. Adjusted EBITDA margin expanded to 34.9% from 33.2% in the prior-year quarter.
In the fourth quarter of 2016, Level 3 Communications generated $557 million of cash from operations, flat year over year. Free cash flow, in the reported quarter, was $251 million compared with $226 million in the prior-year quarter.
At the end of 2016, the company had $1,819 million of cash and cash equivalents and $10,884 million of outstanding debt compared with $854 million and $10,890 million, respectively, at the end of 2015. Meanwhile, the debt-to-capitalization ratio was 0.50 compared with 0.52 at the end of 2015.
Guidance
For 2017, Level 3 Communications expects adjusted EBITDA will be within the range of $2.94 to $3.00 billion. Free cash flow is estimated in the range of $1.10 billion to $1.6 billion. Capital expenditure will likely be 16% of total revenue. Depreciation and amortization is estimated at around $1.35 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revisions for the current quarter.
VGM Scores
At this time, Level 3 Communications' stock has a nice Growth Score of 'B', while it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is suitable for growth investors.
Outlook
The stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.
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Why Is Level 3 Communications (LVLT) Down 3.1% Since Last Earnings?
A month has gone by since the last earnings report for Level 3 Communications, Inc. . Shares have lost about 3.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Level 3 Communications Q4 Earnings Top, Revenues Lag
On a GAAP basis, net income in the reported quarter was $250 million or $0.70 per share compared with $3,323 million or $9.33 in the year-ago quarter. However, quarterly adjusted earnings per share of $0.60 surpassed the Zacks Consensus Estimate of $0.44.
Fourth-quarter total revenue was $2,032 million, down 1% year over year and below the Zacks Consensus Estimate of $2,065 million.
Segment-wise, Core Network Services (CNS) revenues came in at $1,934 million, down 0.5% year over year. Wholesale Voice Services and Other revenues totaled $98 million, down 10.9% year over year.
Geographically, North America generated $1,584 million in CNS revenues, up 1% year over year. Europe, the Middle East and Africa accounted for $180 million of revenues at CNS, down 15% while Latin America contributed $170 million, up 7%.
Total operating expenses in the reported quarter were $1,678 million, down 2.2% year over year. Operating income came in at $354 million, up 4.7%. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was up 4.1% to $709 million. Adjusted EBITDA margin expanded to 34.9% from 33.2% in the prior-year quarter.
In the fourth quarter of 2016, Level 3 Communications generated $557 million of cash from operations, flat year over year. Free cash flow, in the reported quarter, was $251 million compared with $226 million in the prior-year quarter.
At the end of 2016, the company had $1,819 million of cash and cash equivalents and $10,884 million of outstanding debt compared with $854 million and $10,890 million, respectively, at the end of 2015. Meanwhile, the debt-to-capitalization ratio was 0.50 compared with 0.52 at the end of 2015.
Guidance
For 2017, Level 3 Communications expects adjusted EBITDA will be within the range of $2.94 to $3.00 billion. Free cash flow is estimated in the range of $1.10 billion to $1.6 billion. Capital expenditure will likely be 16% of total revenue. Depreciation and amortization is estimated at around $1.35 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revisions for the current quarter.
Level 3 Communications, Inc. Price and Consensus
Level 3 Communications, Inc. Price and Consensus | Level 3 Communications, Inc. Quote
VGM Scores
At this time, Level 3 Communications' stock has a nice Growth Score of 'B', while it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is suitable for growth investors.
Outlook
The stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.