Level 3 Communications
Shares have climbed 34% over the last three months, bringing the one-year return to a fantastic 92%. And last night's second-quarter report cemented the market's conviction that Level 3 belongs at these levels.
Consolidated revenue grew 2.6% year over year to $932 million, somewhat below Street estimates of $937 million. Core network services advanced across the board, with a particularly hefty jump in the European service segment. Heavy price pressure from rivals in the high-speed Internet connectivity segment wasn't bad enough to erase growth in that business, as demand for these lines remains strong.
If you're gasping over the 40% year-over-year drop in "other" sales, thinking that there might be something wrong with the content delivery network services, don't despair: The core networks division includes CDN services, and management likes the growth happening there.
I'm also starting to see the value in the pending merger with long-range networker Global Crossings
Level 3 reported an in-line $0.09 adjusted net loss per share and very thin free cash flows, as big capital expenses balanced out non-cash amortization and depreciation adjustments. That's all right if -- and only if -- you see Level 3 building its future right now, and preparing to slow down on the heavy capital charges further down the line. That's unlikely, given Level 3's very long history of negative cash flows, but anything is possible.
I think the company's heading down a healthy road, but I remain skeptical of the stock as an investment. After reading this free report, you might agree that there are better plays available in the high-speed networking sector. Click here to get your copy now -- it's free, so you've got nothing to lose.