Level 3 Communications Inc. reported mixed financial results in the second quarter of 2016 wherein the top line missed the Zacks Consensus Estimate while the bottom line outpaced the same.
Level 3 Communications operates in a highly competitive enterprise communications market. This Zacks Rank #2 (Buy) company has to compete with telecom giants like Verizon Communications Inc. (VZ - Free Report) and AT&T Inc. (T - Free Report) in North America and with Telefonica, Orange, BT Group and America Movil SAB (AMX - Free Report) in Europe and Latin America.
On a GAAP basis, net income in the reported quarter was $149 million, or 42 cents per share versus a net loss of $13 million or a loss of 4 cents per share in the second quarter of 2015. Moreover, quarterly adjusted earnings per share of 52 cents were well ahead of the Zacks Consensus Estimate of 46 cents.
Second quarter total revenue was $2,056 million, down 0.2% year over year and short of the Zacks Consensus Estimate of $2,084 million.
Segment-wise, Core Network Services (CNS) revenues came in at $1,956 million, up 0.7% year over year. Wholesale Voice Services and Other revenues totaled $100 million, down 16% year over year.
Geographically, North America generated $1,605 million in CNS revenues, up 4% year over year. Europe, the Middle East and Africa accounted for $191 million of revenues at CNS, down 7% while Latin America contributed $160 million, down 2%.
Total operating expenses in the reported quarter were $1,682 million, down 0.4% year over year. Operating income came in at $362 million, up 14.6%. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was up 10% to $715 million. Adjusted EBITDA margin expanded to 34.8% from 31.9% in the prior-year quarter.
In the second quarter of 2016, Level 3 Communications generated $631 million of cash from operations compared with $419 million in the year-ago quarter. Free cash flow, in the reported quarter, was $264 million compared with $102 million in the prior-year quarter.
At the end of the second quarter of 2016, the company had $1,291 million of cash and cash equivalents and $10,878 million of outstanding debt compared with $854 million and $11,009 million, respectively, at the end of 2015. Meanwhile, the debt-to-capitalization ratio was 0.51 compared with 0.52 at the end of 2015.
Guidance
For 2016, Level 3 Communications expects adjusted EBITDA to grow 10% to 12% on a year-over-year basis. Free cash flow is estimated in the range of $1 billion to $1.1 billion.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Level 3 Communications Inc. reported mixed financial results in the second quarter of 2016 wherein the top line missed the Zacks Consensus Estimate while the bottom line outpaced the same.
Level 3 Communications operates in a highly competitive enterprise communications market. This Zacks Rank #2 (Buy) company has to compete with telecom giants like Verizon Communications Inc. (VZ - Free Report) and AT&T Inc. (T - Free Report) in North America and with Telefonica, Orange, BT Group and America Movil SAB (AMX - Free Report) in Europe and Latin America.
On a GAAP basis, net income in the reported quarter was $149 million, or 42 cents per share versus a net loss of $13 million or a loss of 4 cents per share in the second quarter of 2015. Moreover, quarterly adjusted earnings per share of 52 cents were well ahead of the Zacks Consensus Estimate of 46 cents.
Second quarter total revenue was $2,056 million, down 0.2% year over year and short of the Zacks Consensus Estimate of $2,084 million.
Segment-wise, Core Network Services (CNS) revenues came in at $1,956 million, up 0.7% year over year. Wholesale Voice Services and Other revenues totaled $100 million, down 16% year over year.
Geographically, North America generated $1,605 million in CNS revenues, up 4% year over year. Europe, the Middle East and Africa accounted for $191 million of revenues at CNS, down 7% while Latin America contributed $160 million, down 2%.
Total operating expenses in the reported quarter were $1,682 million, down 0.4% year over year. Operating income came in at $362 million, up 14.6%. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was up 10% to $715 million. Adjusted EBITDA margin expanded to 34.8% from 31.9% in the prior-year quarter.
In the second quarter of 2016, Level 3 Communications generated $631 million of cash from operations compared with $419 million in the year-ago quarter. Free cash flow, in the reported quarter, was $264 million compared with $102 million in the prior-year quarter.
At the end of the second quarter of 2016, the company had $1,291 million of cash and cash equivalents and $10,878 million of outstanding debt compared with $854 million and $11,009 million, respectively, at the end of 2015. Meanwhile, the debt-to-capitalization ratio was 0.51 compared with 0.52 at the end of 2015.
Guidance
For 2016, Level 3 Communications expects adjusted EBITDA to grow 10% to 12% on a year-over-year basis. Free cash flow is estimated in the range of $1 billion to $1.1 billion.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on T - FREE
Get the latest research report on VZ - FREE
Get the latest research report on AMX - FREE