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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.

    Share Statistics (28-July-11)   FY

    2009

    FY

    2010

    %

    Chg

    Q4

    2009

    Q4

    2010

    %

    Chg

    Symbol LVLT Revenue, $Mn 3,762.00 3,651.00 -3.0% 910.00 929.00 2.1%
    Current price $2.19 Gross marg. 58.4% 59.2% 1.4% 57.9% 60.0% 3.6%
    52wk Range: $0.83-$2.67 Oper. margin -4.1% -2.6%
    Avg Vol (3m): 41,054,300 Net margin -16.4% -17.0% 3.7% -26.2% -22.1% -15.6%
    Market Cap. 3.73B              
    Shares Outstanding 1.70B EPS, $ -0.38 -0.35 -7.9% -0.12 -0.11 -8.3%

    Source: Reuters.com, SEC Filings.

    Recent News

    Shares of LVLT dropped 2.74% to $2.17 on Wednesday after the provider posted a net loss of $181 million, or $0.11 cents a share, for the second quarter of 2011.  That compares to a net loss of $169 million, or $0.02 a share, in the same quarter last year.  The second quarter net loss included a $0.02 per share charge of $23 million on the extinguishment of debt and $14 million in costs associated with its deal to acquire Global Crossing.  LVLT announced in April a definitive agreement to acquire Global Crossing Ltd. in a tax-free, stock-for-stock transaction.

    LVLT reported consolidated adjusted EBITDA of $226 million in the second quarter of 2011, up from $225 million in the first quarter of 2011 and up from $209 million in the comparable quarter last year.  This year’s second-quarter figure included $8 million in costs associated with the Global Crossing transaction.

    For the quarter, consolidated revenue was $932 million, which compares to consolidated revenue of $929 million in the previous quarter and $908 million in the second quarter of last year.

    Sunit Patel, executive VP and CFO of LVLT, said the Company saw Core Network Services revenue increase 1.7% sequentially on a constant currency basis, demonstrating continued improvement in LVLT’s overall rate of Core Network Services growth.  According to him, the Company saw particular strength from wireless, content, financial services and government customers during the quarter, with gross margin improving almost 2% to $566 million on sequential basis.

    Looking forward, LVLT continues to expect sequential revenue growth in Core Network Services revenue for the rest of 2011 and low double-digit consolidated adjusted EBITDA growth this year as compared to 2010.  Capital expenditures are expected to be about 12% of Communications revenue for the full year 2011, and Free Cash Flow is expected to be roughly breakeven for the last three quarters of 2011 in aggregate. CFO Patel said these expectations do not include any effect from the pending Global Crossing acquisition, which the Company continues to expect to close before the end of the year.

    LVLT shares traded as much as 2.7% higher yesterday on volume of 8.54 million shares.  The stock has been moving within a range of $0.83 – $2.67 over the past 52-weeks.  It is currently trading below its 50-day moving average of $2.32 and below its 200-day moving average of $1.73. Market capitalization currently stands at $3.73 billion and it has 1.70 billion outstanding shares.

    Financial Strength (28-July-2011)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 1.13 1.46 0.64
    Current Ratio (MRQ) 0.97 1.22 1.59 1.01
    LT Debt to Equity (MRQ) 49.04 41.02 120.34
    Total Debt to Equity (MRQ) 62.02 48.09 158.43
    Interest Coverage (TTM) -0.33 0.23 0.10 19.96

    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 3 0 0
    3 months ago 2 1 8 3 0 0
    Last year 1 1 7 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 -7.79% decrease from the last price of 2.17.

    Source: markets.ft.com

    Consensus Estimates Analysis

    # of Estimates

    Mean

    High

    Low

    1 Year Ago

    SALES (in millions)
    Quarter Ending Sep-11 12 945.03 955.00 932.00 923.70
    Quarter Ending Dec-11 12 956.61 968.00 937.10 934.10
    Year Ending Dec-11 13 3,761.70 3,800.00 3,692.00 3,744.41
    Year Ending Dec-12 13 4,119.68 6,767.00 3,708.00 3,846.59
    EARNINGS (per share)
    Quarter Ending Sep-11 12 -0.09 -0.08 -0.12 -0.10
    Quarter Ending Dec-11 12 -0.08 -0.07 -0.09 -0.10
    Year Ending Dec-11 13 -0.38 -0.31 -0.45 -0.39
    Year Ending Dec-12 13 -0.28 -0.11 -0.42 -0.36
    LT Growth Rate (%) 1 4.00 4.00 4.00 -7.00

    Technical Analysis

     

    Source: http://stockcharts.com

    LVLT is trading below its 20-day moving average. However, this moving average is trending higher which suggests that there has been buying interest in this stock.

    LVLT is within its Bollinger Bands. This is a normal condition suggesting that it is neither overbought nor oversold relative to the recent levels.

    The MACD for LVLT currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/
    July28-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    AT&T Inc. T 29.67 175.71B 12.47 11.64 1.39 1.38
    CenturyLink Inc. CTL 37.69 22.63B 14.33 13.76 1.27 1.29
    Cogent Communications Group Inc. CCOI 15.37 688.13M 219.57 41.54 2.56 2.02
    Verizon Communications Inc. VZ 36.16 102.30B 16.14 13.85 0.92 0.88
    Diversified Communication Services Median       11.74 n/a 1.45 n/a
    Level 3 Communications Inc. LVLT 2.19 3.73B n/a n/a 0.99 0.95

    Source: Thomson Financial

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