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Why Should You Hold Level 3 Communications (LVLT) Stock?

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On Aug 7, Level 3 Communications, Inc.  was upgraded to Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, the company has a strong presence in several fields of enterprise networking including data networks, content distribution, managed services, securities, voice cloud and cloud connection. Also, it stands to benefit from the ongoing trend of large enterprise customers shifting to IP and fiber-based network architecture.  

Recently, CenturyLink and Level 3 Communications moved a step closer to complete their proposed merger after receiving approvals from almost 23 states and territories. The combined entity is likely to generate $975 million of annual cash synergies. Moreover, it is expected to be closed in the third quarter of 2017, subject to customary regulatory approvals.

Going forward, we believe this unit will be a formidable force in the fiber-based metro-Ethernet and Internet market.

Additionally, the company has launched its automated on-demand Network-as-a-Service (NaaS) with Adaptive Network Control Solutions, which is powered by Cisco System’s Network Service Orchestrator (NSO).

Level 3 Communications’ collaboration with Cisco Systems will enable the former to offer hybrid cloud connectivity, dynamic capacity with bandwidth of up to 300%, optimized data backup and real-time information on network performance and utilization.

Besides, on Aug 2, it posted strong second-quarter 2017 results where the company’s bottom and top lines surpassed the Zacks Consensus Estimate.

However, Level 3 Communications has to compete with telecom giants like Verizon Communications Inc. (VZ - Free Report) and AT&T Inc. (T - Free Report) in North America and Telefonica, Orange (ORAN), BT Group and America Movil SAB (AMX - Free Report) in Europe and Latin America.  Also, customer concentration, foreign currency exchange rate risks and global macroeconomic fluctuations are considered to be the other dampeners for the company’s growth prospects.

Price Performance

Shares of Level 3 Communications have underperformed the industry’s growth for the last six months. The stock price declined 0.5% against the industry’s gain of 6.5% in the same time span.

 

 

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