Level 3 Surges (LVLT)

Level 3 Communications, Inc. (NASDAQ: LVLT) posted results with earnings coming in at -$0.06 EPS from a $91 million net loss on revenues of $1.10 Billion.  First Call had estimates -$0.11 EPS and $1.08 Billion in revenues.  It also posted free cash flow of $41 million and an adjusted EBITDA of $246 million.

The communications deferred revenue balance was $929 million and it had had cash and marketable securities of approximately $723 million at the end of the fourth quarter.

The company will not be providing quarterly guidance beginning with 2008, although it did offer some long-term targets. Sunit Patel, CFO: "We believe that quarterly guidance is subject to volatility from seasonal and usage patterns and is of limited value to long term investors… Alternatively, we plan to comment on projected revenue, expense, cash flow and other longer term trends that we believe are better indicators of long term value creation." It is offering a core revenue growth range of 8% to 13% for 2008 with growth to pick over the course of the year; puts 2008 EBITDA of $950 million to $1.1 Billion.  It also expects lower revenue from seasonality in the first quarter.

Level 3 shares are surging on the improved results and on 2008 projections.  Shares are up some 11% to $3.49 in pre-market trading, although that was the initial surge and we still have a negative overhang in tech shares from Cisco earnings.  The 52-week trading range is $2.50 to $6.78.

Jon C. Ogg
February 7, 2008