Level 3 Communications Beats Q3 Earnings, Lags Revenues

Level 3 Communications, Inc. (LVLT) reported financial numbers for the third quarter of fiscal 2014 wherein quarterly earnings of 37 cents per share outpaced the Zacks Consensus Estimate of 31 cents. On a GAAP basis, the company reported net income of $85 million or 35 cents per share compared with a loss of $21 million or 9 cents per share in the prior-year quarter.

Recently, the company completed the acquisition of tw telecom on Oct 31, 2014 wherein its enterprise revenues climbed 8.4% year over year while the M-EBITDA came in at $143 million in the third quarter.

Result Details

Level 3 Communications posted total revenue of $1,629 million in the reported quarter, up 3.8% year over year, but below the Zacks Consensus Estimate of $1,633 million. Adjusted EBITDA came in at $471 million, increasing 16.6% from the year-ago quarter.

Adjusted EBITDA margin in the same quarter was 28.9% against 25.7% in the year-ago quarter. Network access margin in the third quarter of 2014 stood at 62.7% against 61.2% in the same quarter last year.

Liquidity

At the end of the third quarter, Level 3 Communications generated around $321 million in cash from operations compared with 104 million at the end of the same quarter last year. Free cash flow, at the end of third quarter, stood at $15 million against $16 million at the end of third-quarter 2013. At the end of the reported quarter, the company had approximately $729 million in cash, and cash equivalents compared with 507 million at the end of the third quarter of 2013. Meanwhile, total debt stood at $8,856 million as against $8,537 million in the prior-year quarter.

Segment Wise Results

Core Network Service revenues totaled $1482 million, up 6.1% year over year. Wholesale Voice services and Other revenues were approximately $147 million, down 14.5% year over year.

Geographically, North America generated $1,063 million, up 7.7% year over year. EMEA recorded $219 million revenues, down 5% year over year, while Latin America contributed $200 million, up 9% year over year.

Other Stocks to Consider

Level 3 Communications currently has a Zacks Rank #3 (Hold). Other better-ranked stocks in the Internet/Application software industry include Attunity, Ltd. (ATTU), Qualys, Inc. (QLYS) and Chunghwa Telecom Co., Ltd. (CHT). Both Attunity and Qualys have a Zacks Rank #1 (Strong Buy) while Chunghwa Telecom has a Zacks Rank #2 (Buy).