Level 3’s 4Q15 Results: Market’s Reaction Was Positive



Level 3’s earnings in 4Q15

Level 3 Communications (LVLT) reported its 4Q15 results on February 4, 2016. In this series, we’ll take a broad look at the company’s performance during the quarter. Level 3 reported GAAP (generally accepted accounting principles) earnings of ~$3.3 billion for 4Q15. The company also recorded a ~$3.2 billion income tax benefit.

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During the quarter, Level 3’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was ~$0.68 billion compared with the pro forma figure of ~$0.47 billion in 4Q14. Note that according to the company, the figures for TW Telecom’s acquisition-related expenses of $4 million and $156 million in 4Q15 and 4Q14, respectively, are included in the adjusted EBITDA figures.

The market received Level 3’s 4Q15 results and guidance for 2016 positively. The company’s stock rose ~6.9% from the previous day’s closing price on the day the results were announced.

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Level 3’s guidance for 2016

According to Level 3, its free cash flows are expected to increase from ~$0.66 billion in 2015 to $1–$1.1 billion in 2016.

According to Level 3, its adjusted EBITDA is expected to grow 9%–12% YoY (year-over-year) in 2016. The company is taking into account 2015 adjusted EBITDA of ~$2.6 billion, which doesn’t have the contribution from Level 3’s Venezuela subsidiary for three quarters, according to the company.

For a diversified exposure to select telecommunications players in the United States, you may consider investing in the iShares Russell 1000 Value ETF (IWD). IWD had a total of ~2.3% in AT&T (T), CenturyLink (CTL), Level 3 Communications, Verizon (VZ), and T-Mobile (TMUS) at the end of December 2015.


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