A month has gone by since the last earnings report for Level 3 Communications, Inc. . Shares have added about 7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Level 3 Communications Lags Q1 Earnings, Revenues Top
Net Income
On a GAAP basis, net income in the reported quarter was $95 million or $0.26 per share compared with $128 million or $0.36 per share in the year-ago quarter. However, quarterly adjusted earnings per share (EPS) of $0.34 missed the Zacks Consensus Estimate of $0.37. There was no change in the company’s bottom line year over year.
Revenue
First-quarter 2017 total revenue was $2,048 million, down 15% year over year and above the Zacks Consensus Estimate of $2,046.9 million.
Segment-wise, Core Network Services’ (CNS) revenues came in at $1,946 million, flat year over year. Wholesale Voice Services and Other revenues totaled $102 million compared with $105 million in the year-ago quarter.
Geographically, North America generated $1,594 million in CNS revenues, down 0.44% year over year. Europe, the Middle East and Africa accounted for $175 million of revenues at CNS, down 8% while Latin America contributed $177 million, up 14%.
Operating Metrics
Total operating expenses in the reported quarter were $1,711 million compared with $1,689 million in the year-ago quarter. Operating income came in at $337 million compared with $362 million in the first quarter of 2016. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $725 million versus $710 million at the end of Mar 2016. Adjusted EBITDA margin expanded to 35.4% from 34.6% in the prior-year quarter.
Cash Flow
In the first quarter of 2017, Level 3 Communications generated $539 million of cash from operations compared with $510 million in the year-ago quarter. Free cash flow was $173 million compared with $213 million in the prior-year quarter.
Liquidity
At the end of Mar 2017, the company had $1,947 million of cash and cash equivalents and $10,581 million of outstanding debt compared with $1,004 million and $10,870 million, respectively, at the end of Mar 2016. Meanwhile, the debt-to-capitalization ratio was 0.42 compared with 0.43 at the end of Mar 2016.
2017 Guidance
The full-year guidance was reiterated at $2.94–$3.00 billion for EBITDA, $1.10–$1.16 billion for free cash flow and 16% of total revenue for capital expenditure. Depreciation and amortization is projected at be $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 revision higher for the current quarter compared to two lower. While looking back an additional 30 days, we can see even more downside. There have been three downward revisions in the last two months.
Level 3 Communications, Inc. Price and Consensus
VGM Scores
At this time, Level 3 Communications' stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with an 'D'. 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 aggregtae VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions is net zero. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Level 3 Communications (LVLT) Up 7% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Level 3 Communications, Inc. . Shares have added about 7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Level 3 Communications Lags Q1 Earnings, Revenues Top
Net Income
On a GAAP basis, net income in the reported quarter was $95 million or $0.26 per share compared with $128 million or $0.36 per share in the year-ago quarter. However, quarterly adjusted earnings per share (EPS) of $0.34 missed the Zacks Consensus Estimate of $0.37. There was no change in the company’s bottom line year over year.
Revenue
First-quarter 2017 total revenue was $2,048 million, down 15% year over year and above the Zacks Consensus Estimate of $2,046.9 million.
Segment-wise, Core Network Services’ (CNS) revenues came in at $1,946 million, flat year over year. Wholesale Voice Services and Other revenues totaled $102 million compared with $105 million in the year-ago quarter.
Geographically, North America generated $1,594 million in CNS revenues, down 0.44% year over year. Europe, the Middle East and Africa accounted for $175 million of revenues at CNS, down 8% while Latin America contributed $177 million, up 14%.
Operating Metrics
Total operating expenses in the reported quarter were $1,711 million compared with $1,689 million in the year-ago quarter. Operating income came in at $337 million compared with $362 million in the first quarter of 2016. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $725 million versus $710 million at the end of Mar 2016. Adjusted EBITDA margin expanded to 35.4% from 34.6% in the prior-year quarter.
Cash Flow
In the first quarter of 2017, Level 3 Communications generated $539 million of cash from operations compared with $510 million in the year-ago quarter. Free cash flow was $173 million compared with $213 million in the prior-year quarter.
Liquidity
At the end of Mar 2017, the company had $1,947 million of cash and cash equivalents and $10,581 million of outstanding debt compared with $1,004 million and $10,870 million, respectively, at the end of Mar 2016. Meanwhile, the debt-to-capitalization ratio was 0.42 compared with 0.43 at the end of Mar 2016.
2017 Guidance
The full-year guidance was reiterated at $2.94–$3.00 billion for EBITDA, $1.10–$1.16 billion for free cash flow and 16% of total revenue for capital expenditure. Depreciation and amortization is projected at be $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 revision higher for the current quarter compared to two lower. While looking back an additional 30 days, we can see even more downside. There have been three downward revisions in the last two months.
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 an average Growth Score of 'C', though it is lagging a bit on the momentum front with an 'D'. 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 aggregtae VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions is net zero. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.