Level 3 Communications Inc. LVLT – a major international communications and information services company – is scheduled to report fourth-quarter 2015 financial numbers on Feb 4, before market opens.
Last quarter, the company had delivered an impressive 4.35% positive earnings surprise. Let’s see how things are shaping up for this announcement. Moreover, the company’s earnings have surpassed the Zacks Consensus Estimate in all of the previous four quarters, with an average beat of 5.37%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that the company is likely to beat the Zacks Consensus Estimate because it has the right combination of two key ingredients.
Zacks ESP: Level 3 Communications has an earnings ESP of +5.77%. This is because the Most Accurate estimate is 55 cents while the Zacks Consensus Estimate is pegged lower at 52 cents. This is meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: The company has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of Level 3 Communications’ Zacks Rank #3 and +5.77% ESP makes us confident of a better-than-expected bottom line at the company.
What is Driving the Better-than-Expected Earnings?
Level 3 Communications is gradually converting its business model into a predominantly large, enterprise-focused entity. The company stands to benefit from the ongoing trend of large enterprise customers shifting to IP and fiber-based network architecture. Recently, the company completed its 49 mile network expansion and established a high-tech center in Northern New Jersey. The expansion will provide customers with secure access to the company’s enhanced network capabilities and unified communications solutions.
Moreover, Level 3 Communications recently launched a new product – Level 3 Secure Access Cellular Service, that uses both cellular and security technologies to provide a redundant and scalable option for Internet connectivity. This product provides on demand rapid network connectivity as well as redundancy for business continuity capabilities useful for its business customers. We believe a growing portfolio of managed security services will help the company boost its revenues from the business segment going forward.
Other Stocks to Consider
Level 3 Communications is not the only company looking up this earnings season. Here are some other companies that investors may consider as our model shows these too have the right combination of elements to post an earnings beat this quarter.
MGM Resorts International MGM, which has an earnings ESP of +62.5% and a Zacks Rank #2.
Macquarie Infrastructure Corporation MIC , which has an earnings ESP of +3.70% and a Zacks Rank #1.
MaxLinear, Inc. MXL which has an earnings ESP of +2.94% and a Zacks Rank #1.
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