Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of communications network Level 3 Communications (LVLT) popped 10% today after its quarterly results and outlook impressed Wall Street.
So what: The stock has soared over the past year on improving fundamentals, and today's Q4 profit swing -- EPS of $0.06 versus a year-ago loss of $0.23 -- coupled with upbeat guidance only reinforces that trend. While revenue slipped about 1% to $1.6 billion, gross margins increased 200 basis points to 61.4%, suggesting that management is positioning the company well for prolonged profitability.
Now what: Management now expects 2014 EBITDA to increase 11%-14% over the year-ago period on revenue growth of more than 3%. "In 2014, we look forward to building on the strong foundation for growth in revenue, Adjusted EBITDA and free cash flow that we laid in 2013," said CFO Sunit Patel. "Overall for the full year 2014, we expect CNS revenue growth to be higher than the 2.9 percent growth we saw for the full year 2013, on a constant currency basis."
Of course, when you couple Level 3's still-hefty debt load with its red-hot stock price, waiting for a wider margin of safety before buying that bullishness seems prudent.
