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Level 3 Communications Increases Sales but Misses Revenue Estimates

Level 3 Communications (NYSE: LVLT  ) reported earnings on Feb. 8. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Level 3 Communications missed estimates on revenue and met expectations on earnings per share.

Compared to the prior-year quarter, revenue increased significantly and GAAP loss per share increased.

Gross margins shrank, operating margins improved, and net margins shrank.

Revenue details
Level 3 Communications reported revenue of $1.58 billion. The 10 analysts polled by S&P Capital IQ expected a top line of $1.64 billion. GAAP sales were 71% higher than the prior-year quarter's $921.0 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Non-GAAP EPS came in at -$1.02. The 12 earnings estimates compiled by S&P Capital IQ predicted -$1.02 per share on the same basis. GAAP EPS were -$0.80 for Q4 versus -$0.47 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 58.2%, 220 basis points worse than the prior-year quarter. Operating margin was 2.8%, 380 basis points better than the prior-year quarter. Net margin was -10.3%, 470 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $1.64 billion. On the bottom line, the average EPS estimate is -$0.96.

Next year's average estimate for revenue is $6.70 billion. The average EPS estimate is -$3.26.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 1,858 members out of 1,985 rating the stock outperform, and 127 members rating it underperform. Among 259 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 235 give Level 3 Communications a green thumbs-up, and 24 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Level 3 Communications is hold, with an average price target of $30.43.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 09, 2012, at 9:02 PM, temp1028 wrote:

    HUH??? What's with the Motley Fool. Why do all you articles seem to get this wrong? LVLT beat EPS estimates. That's clear. That's why it was up 9% yesterday. Is there an agenda?

    Actual vs. Wall St. Expectations: Level three Communications, Inc. reported an adjusted net loss of 62 cents per share. By that measure, the company beat the mean analyst estimate of a loss of $1.02 per share. It fell short of the average revenue estimate of $1.63 billion.

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