Why Level 3 Communications, Inc. Shares Leapt Today

Is Level 3's jump meaningful? Or just another movement?

Steve Symington
Steve Symington
Apr 30, 2014 at 4:39PM
Technology and Telecom

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 Level 3 Communications, (NYSE:LVLT) jumped nearly 16% Wednesday after the company posted better-than-expected first-quarter results and strong forward guidance.

So what: Quarterly revenue rose 2% year over year, to $1.609 billion, which translated earnings of $0.47 per diluted share. Analysts, on average, were expecting earnings of just $0.28 per share on sales of $1.59 billion. Meanwhile, on a pro forma basis, Level 3's adjusted EBITDA increased 23.5%, to $458 million.

Level 3 also increased guidance for adjusted EBITDA, which is expected to grow 14% to 18% for the full year 2014. By comparison, Level 3 previously saw 11% to 14% growth. In addition, 2014 free cash flow is now expected to be $250 million to $300 million, or a $25 million increase from both the top and bottom ends of Level 3's previous range. 

Now what: All things considered, I think investors have every right to celebrate today's report. If Level 3 Communications can continue grabbing market share and focusing on profitable growth, I see no reason the stock can't continue to reward patient shareholders from here.