Level 3 Communications (LVLT) Tops Q4 Earnings, Revenues Lag

Level 3 Communications Inc.  LVLT reported mixed financial results in the fourth quarter of 2016. While the top line failed to meet the Zacks Consensus Estimate, the bottom line easily outpaced the mark.

On a GAAP basis, net income in the reported quarter was $250 million or 70 cents per share compared with $3,323 million or $9.33 per share in the year-ago quarter. However, quarterly adjusted earnings per share of 60 cents surpassed the Zacks Consensus Estimate of 44 cents.

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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 be 16% of total revenue. Depreciation and amortization will be $1.35 billion.

Recent Development

On Oct 31, 2016, Level 3 Communications entered into a definitive agreement with CenturyLink Inc. CTL through which the former will be acquired by the latter for total consideration of $24 billion. The cash and stock deal is expected to close by the end of the third quarter of 2017. The merged entity will be able to compete with the likes of telecom giants like AT&T Inc. T and Verizon Communications Inc. VZ in the communications industry. Level 3 Communications is currently carrying a Zacks Rank #4 (Sell). However, the three other above-mentioned stocks sport a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Level 3 Communications, Inc. Price, Consensus and EPS Surprise

 

Level 3 Communications, Inc. Price, Consensus and EPS Surprise | Level 3 Communications, Inc. Quote

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