... and a boost on Wall Street
fter a long battle for profitability, Level 3 (NYSE: LVLT), the Broomfield-based telecom giant, is seeing a distinct break in the clouds. Following a positive first quarter earnings report, Wall Street analysts have been pushing the company’s future earnings estimates to new heights.
Zacks.com, a website that tracks earnings predictions, reports that in the last 30 days alone, consensus estimates for Level 3 Q2 earnings have soared more than 25 percent, from 27 cents per share to 34 cents per share. Year-end estimates have grown even more, increasing from $1.18 per share 30 days ago to $1.54 per share today, a gain of more than 30 percent.
The Wall Street optimism comes on the heels of the appointment of a new board chairman. The company announced last week that James O. Ellis, Jr. will succeed outgoing chairman Walter Scott, Jr.
Ellis is no stranger to technology enterprises. He is a former commander of the U.S. Strategic Command at Offutt Air Force Base and former president and CEO of the Institute of Nuclear Power Operations, an organization charged with setting industry-wide guidelines for nuclear power plants. In addition to serving on the Level 3 board since 2005, he is also currently a member of the boards of Lockheed Martin Corporation and Dominion Resources, Inc.
"Jim brings more than 40 years of experience in managing and leading complex, technology-focused organizations to this appointment," says Level 3 president and CEO Jeff Storey. "I'm excited to work with Jim in his role as Chairman and continue to grow the business."
Earlier this month, Level 3 also announced some executive changes. Laurinda Y. Pang, who had been running the company’s human resources operations, was promoted to succeed retiring chief administrative officer Thomas C. Stortz. John M. Ryan, chief legal officer and assistant secretary, succeeds Stortz as the company's secretary.
In her new role, Pang will have global responsibility for Level 3's human resources, corporate strategy, corporate development, corporate communications and corporate social responsibility. Pang has worked at Level 3 and its predecessor companies since 1994. In the past, she has served as vice president of customer experience re-engineering, vice president of investor relations and in other leadership roles in sales, operations and marketing.
Level 3 Communications is by all accounts a huge enterprise. Headquartered in Broomfield, the company provides core transport, IP, voice, video, and content delivery for most of the medium to large Internet carriers in North America, Latin America, Europe, and selected cities in Asia. It is the largest competitive local exchange carrier (CLEC) and the second largest provider of fiber optic internet access in the U.S., according to the broadbandnow website. It serves customers in more than 500 markets in over 60 countries.
The company also announced recently it has been selected to provide network infrastructure for the federal judicial system, encompassing nearly 300 sites, including the U.S. Courts of Appeals, U.S. District Courts, U.S. Bankruptcy Courts and U.S. Courts of Special Jurisdiction.
Earlier this month, the company reported total revenues of $1.6 billion for the first quarter 2014, slightly higher than the first quarter of 2013. But the real progress came in net income: $112 million, compared to a loss of $78 million in the first quarter the year before. That translated to earnings per share of $0.47, compared to $0.36 for the same quarter last year. The 47-cent EPS shattered the estimated 28 cents predicted by analysts.
"We started out the year with another good quarter," says CEO Storey. "The results reflect our focus on execution and emphasis on profitable growth. We continue to capture market share by helping enterprises optimize their cost structure while moving to newer, more scalable technologies."
Some other first quarter highlights:
- Revenue from Core Network Services (CNS) — colocation and datacenter services, transport and fiber, IP and data services, and voice services — was $1.457 billion, a 6.6 percent increase year-over-year.
- Revenue from Enterprise Core Network Services grew 11 percent year-over-year.
- Gross revenue increased to 61.8 percent in the first quarter, from 60.1 percent in the first quarter of 2013.
- Free Cash Flow improved by $140 million, compared to the first quarter 2013.
Executives were clearly pleased with Q1 results — so much so that the company revised its outlook for full year income.
"With the performance in CNS revenue and Adjusted EBITDA this quarter, we are updating our full year 2014 outlook," says Level 3 CFO Sunit Patel. "We now expect adjusted EBITDA to grow 14 to 18 percent for the full year 2014 compared to our prior outlook of 11 to 14 percent."
Wall Street was apparently pleased as well. The stock price — $43.76 as of May 27 — has risen almost 17 percent in the last four weeks.