Level 3 Communications (NYSE:LVLT) will release its quarterly report on Wednesday, and the stock has taken investors on a roller-coaster ride throughout the past several years. Yet after a long period of losing money, the company has steadily made progress on reducing its losses, and investors hope that this quarter's report will show that Level 3 earnings are finally starting to approach going positive for the first time in years.

As a telecom services and equipment provider, Level 3 is largely dependent on the willingness of its customers to make capital expenditures to improve their network offerings. Lately, those customers have been stingy with their capital budgets, and that has pressured Level 3's results. Will those trends finally reverse themselves in an improving economic environment? Let's take an early look at what's been happening with Level 3 Communications over the past quarter and what we're likely to see in its report.

Stats on Level 3 Communications

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$1.59 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How long will Level 3 earnings stay in the red?
In recent months, analysts have gotten more pessimistic about the chances of Level 3 earnings breaking into the black this quarter, doubling their loss estimates for both the June quarter and the full 2013 year. That's kept a lid over the stock's price, although shares have still risen by almost 7% since late April.

Level 3's first-quarter report only emphasized the struggles that the company has had lately. Although the company narrowed its quarterly loss after excluding foreign-exchange factors and other one-time charges, Level 3 reported a slight drop in revenue due largely to weakness in Europe. The company believes that high levels of customer churn will return to their typical levels this year and reiterated its guidance projecting higher growth this year, but the stock didn't respond particularly favorably to the news.

One problem that Level 3 faces is that its customers' subscribers are moving away from some of its offerings. For instance, the company's wholesale voice services division has seen sales decline as a longtime SBC Contract Services arrangement has slowly seen its traffic migrate to the AT&T network. Moreover, competition in the industry has gotten fierce, with rival Akamai Technologies (NASDAQ:AKAM) continuing to hold up better on a relative basis. Just last week, the company managed to beat revenue estimates for its second quarter, with particular strength in both its media-delivery and performance & security business lines.

But some investors still see promise from Level 3 despite tough industry conditions. Keith Meister of Corvex Management, who worked with activist investor Carl Icahn, said in May that Level 3 should buy out TW Telecom (NASDAQ: TWTC), citing growth trends in the industry and strong potential for benefits from strategic combinations. Both stocks rose on the comments, even though no progress on an actual buyout bid has been evident.

In the Level 3 earnings report, be sure to compare the company's growth to Akamai's report, especially in the areas in which their business overlaps. If Level 3 fails where Akamai and its peers are succeeding, it could spell long-term trouble for Level 3's hopes of becoming profitable.

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