Level 3 Earnings To Outline Direction (LVLT)

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Level 3 Communications, Inc. (NASDAQ: LVLT) is set to release its third quarter 2009 earnings results on Wednesday morning before the open and plans to hold a conference call at 10:30 AM EST.  Thomson Reuters has consensus estimates at -$0.10 EPS and $926.25 million in revenues.  If Level 3 gives guidance, the estimates for Q4 are -$0.10 EPS and $922.88 million in revenues.  Because this is such a cult stock, the actual metrics behind the scenes are likely to dominate over just the corporate earnings reports.

As far as analyst calls, there is really nothing to add here.  The average price target is well under the share price, and that is assuming that old old calls that have not been cleaned up are left in there.  We are cautious in using any great chart figures on a $1.00+ stock chart, but it is interesting where Level 3 is trading today.  Shares are at $1.32 and the 50-day moving average is at $1.31 today.  Since the stock has crossed above the rolling 50-day moving average back in September, the 50-day level has been used as support.  And if that does not hold then the 200-day moving average is at $1.16.  $1.14 to $1.17 was also support in August and September.

An aspect that has not been in the past quarters and that will only appear in the quarters into 2010 and beyond is the recent announcement of the launch of Level 3 Tower Access to offers direct wireless tower connectivity to the Level 3 network.   Another issue is that Level 3 has been steadily pushing out its debt maturities with refinancings (debt sales).  Recently, it sold $275M in convertible securities that was used as a debt maturity roll-out.  Another issue at hand is its fight with HyperCube LLC, and a recent release from HyperCube offers no comfort that this has been resolved as the company said in a filed complaints that Level 3 owes HyperCube about $22 million for interstate and intrastate calls.

If you are one of the active traders that trades around earnings the second they are released, the company’s last earnings release was exactly at 8:00 AM EST.  While traders may whip the stock around based on tomorrow’s news, this one is expected to lose money in 2009 and in 2010 with expected revenues of $3.77 billion in 2009 and $3.75 billion in 2010.  If the company does not get back to growth, at some point investors will want to know when it can get itself back to profitability.  For whatever the short interest of a $1.00+ stock matters, the short interest as of October 15 was 85.9 million shares and there has been no single day where trading was over 10 million shares of common stock since the October 15 settlement date.

The balance sheet will of course be different after the quarter, but as of June 30 its cash was listed as $632 million and its direct long-term was over $6.1 billion and total liabilities were over $8.4 billion.  Level 3’s 52-week trading range is $0.57 to $1.77.

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Jon C. Ogg