Stock Alert for Level 3 Communications Inc. (LVLT)
  • Stock Alert for Level 3 Communications Inc. (LVLT)
  • Stock Alert for Level 3 Communications Inc. (LVLT)
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    Stock Alert for Level 3 Communications Inc. (LVLT)

    Level 3 Communications Inc. (LVLT) is an international provider of fiber-based communications services. Since 1998, the Company has been focused on delivering premier services over one of the world’s most advanced, IP-optimized networks. LVLT owns and maintains over 54,000 intercity route miles. It offers a comprehensive portfolio of network offerings that spans Internet Protocol (IP) services, broadband transport, colocation services, and patented Softswitch-based managed modem and voice services. It also uses these network services as a foundation for delivering enterprise telecommunications solutions.

    LVLT was incorporated in 1941 and is headquartered in Broomfield, Colorado.

    Share Statistics (20-June-11)

    FY

    2009

    FY

    2010

    %

    Chg

    Q1

    2010

    Q1

    2011

    %
    Chg
    Symbol LVLT Revenue, $Mn 3,762.00 3.651.00 -3.0% 910.00 929.00 2.1%
    Current price $2.15 Gross marg. 58.4% 59.2% 1.4% 57.9% 60.0% 3.6%
    52wk Range: $0.83-$2.46 Oper. margin -4.1% -2.6%
    Avg Vol (3m): 45,353,400 Net margin -16.4% -17.0% 3.7% -26.2% -22.1% -15.6%
    Market Cap. 3.66B
    Shares Outstanding 1.70B EPS, $ -0.38 -0.35 -7.9% -0.12 -0.11 -8.3%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of LVLT added $0.03 to close Monday’s session at $2.15, a 1.42% increase from Friday’s closing.  Over 43 million shares have traded hands during the session, versus the 10-day average volume of 37.62 million. The stock has been moving within a range of $0.83 – $2.46 over the past 52-weeks.  It is currently trading above its 50-day moving average of $1.99 and above its 200-day moving average of $1.45. Market capitalization currently stands at $3.66 billion and it has 1.70 billion outstanding shares.

    The Colorado-based communications services provider last week announced that it has received five awards in ATLANTIC-ACM’s 2011 North America Business Services Study, recognizing LVLT’s leadership in delivering voice and data services that meet the needs of enterprise customers.

    According to Fedor Smith, president of ATLANTIC-ACM, LVLT has clearly been identified as a leader in enterprise network services among a broad collective of enterprise customers and peers. “The variety of categories for which Level 3 was recognized demonstrates their customers’ appreciation of Level 3’s ability to offer enterprises a comprehensive and first-rate service experience,” he said.

    Q1 Results

    LVLT reported consolidated revenue of $929 million for the first quarter 2011, a 2.1% increase from the prior year quarter.

    The Company’s net loss for the quarter was $205 million, or $0.12 per share, which included charges totaling $0.03 per share, for income tax expense of $27 million, primarily related to deferred tax liabilities attributable to certain indefinite-lived intangible assets, and a loss of $20 million on the extinguishment of debt. That was narrower than the net loss of $238 million, or $0.14 per share, it booked in the same period a year earlier, which included a loss on the extinguishment of debt of $54 million, or $0.03 per share.

    Consolidated Adjusted EBITDA was $225 million in the first quarter 2011, compared to $226 million in the fourth quarter 2010 and $200 million in the first quarter 2010.

    “We see many opportunities across our customer base to continue growing our business throughout the year, LVLT CEO James Q. Crowe commented in the release.  “Our customers require more and more bandwidth to support the continued adoption of video over the Internet, the continued growth in wireless broadband, and the rising demand for bandwidth in the enterprise market. Our mix of network assets, our service capabilities and our focus on customer service excellence are making Level 3 a top choice for wholesale and enterprise customers in the U.S. and Europe.”

    As of March 31, 2011, LVLT had cash and cash equivalents of approximately $1,079 million, or $616 million on a pro forma basis after the partial redemption of the Company’s 9.25% Senior Notes due 2014 that was completed after the close of the first quarter 2011.

    Outlook

    LVLT expects the sequential growth in Core Network Services Revenue to strengthen in the second quarter.  For the full year 2011, the Company generally expects stronger sequential revenue growth compared to 2010. It expects low double-digit percentage growth in Consolidated Adjusted EBITDA this year, given the Company’s high incremental margins.

    For this year, the Company expects GAAP interest expense of about $625 million and net cash interest expense of about $555 million. It expects capital expenditures to be approximately 12% of Communications revenue. Free Cash Flow is expected to be roughly breakeven for the remainder of 2011 in aggregate.

    On April 11, 2011, LVLT announced that it had entered into a definitive agreement to acquire Global Crossing Ltd. in a tax-free, stock-for-stock transaction. Under the terms and subject to conditions of the agreement, Global Crossing shareholders will receive 16 shares of LVLT common stock for each share of Global Crossing common stock or preferred stock that is owned at closing.  According to Sunit Patel, LVLT executive vice president and CFO, the Company expects to incur some integration planning- and transaction-related costs between signing and closing, and will separately disclose those in its quarterly results.

    Visit LVLT at www.level3.com

    Financial Strength (20-June-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.11 1.17 0.71
    Current Ratio (MRQ) 1.26 1.20 1.26 1.03
    LT Debt to Equity (MRQ) 51.23 44.09 135.91
    Total Debt to Equity (MRQ) 63.78 53.12 181.88
    Interest Coverage (TTM) -0.26 0.33 0.14 18.05

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among 14 polled investment analysts. Against the Level 3 Communications Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 2 1 8 3 0 0
    4 weeks ago 2 1 8 3 0 0
    2 months ago 2 1 8 4 0 0
    3 months ago 2 1 6 5 3 0
    Last year 1 1 8 4 3 0

    The eight analysts offering 12-month price targets for LVLT have a median target of 2.00, with a high estimate of 3.00 and a low estimate of 1.00. The median estimate represents a -5.66% decrease from the last price of 2.12.

    Source: markets.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Jun-11 12 937.42 944.00 926.00 918.30
    Quarter Ending Sep-11 12 945.88 955.00 932.00 923.70
    Year Ending Dec-11 14 3,760.93 3,800.00 3,692.00 3,750.41
    Year Ending Dec-12 14 3,892.79 4,010.00 3,708.00 3,862.20
    EARNINGS (per share)
    Quarter Ending Jun-11 13 -0.09 -0.08 -0.11 -0.11
    Quarter Ending Sep-11 13 -0.08 -0.08 -0.09 -0.11
    Year Ending Dec-11 14 -0.37 -0.31 -0.45 -0.40
    Year Ending Dec-12 14 -0.28 -0.17 -0.42 -0.36
    LT Growth Rate (%) 1 4.00 4.00 4.00 -7.00

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=LVLT.O

    Technical Analysis

    Source: http://stockcharts.com

    On Wednesday last week, LVLT closed below its 20-day moving average. This is generally considered to be an indication of a bearish trend.

    LVLT has been relatively stable recently. This is evidenced by the width of its Bollinger Bands, which are tighter than normal. Additionally, LVLT is within its Bollinger Bands. This is a normal condition suggesting that it is neither overbought nor oversold relative to the recent price action.

    LVLT’s MACD is indicating a weak bearish signal. Although the indicator is above the critical level of 0, which implies that the underlying moving averages are bullish, the MACD has crossed below its 9-day moving average or signal line. This suggests that positive momentum has begun to slow.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    June-20-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Cogent Communications Group Inc. CCOI 15.47 692.61M 221.00 41.81 2.27 2.03
    CenturyLink Inc. CTL 39.61 23.79B 14.95 14.15 1.41 1.36
    AT&T Inc. T 30.97 183.38B 13.12 12.19 1.46 1.44
    Global Crossing Ltd. GLBC 33.77 2.06B n/a n/a 0.75 0.73
    Verizon Communications Inc. VZ 35.63 100.80B 16.05 13.65 0.91 0.87
    Diversified Communication Services Median 13.91 n/a 0.90 n/a
    Level 3 Communications Inc. LVLT 2.15 3.66B n/a n/a 0.97 0.93

    Source: Thomson Financial

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