If you bought Level 3 (LVLT) shares a year ago, you lost. The stock closed at $5.68 last May 2. It now trades at $5.38. When the stock hit $6.76 in February, it all looked so promising.
The revenue figure for the quarter just released is tricky. The company says revenue rose from $822 million in the same quarter a year ago to $1.056 billion in the just reported quarter. But, Level 3 bought Broadwing in the meantime. And revenue from that company put $236 million into the pot. So, the real growth is in the region of nil.
The company has a bad habit of comparing the first quarter of 2007 to the fourth quarter of 2006. To get the actual quarter-over-last-year-quarter, investors have to dig. It shows that operating income got worse, going from a loss of $57 million last year to $75 million this year. Net income went from a negative $168 to a loss of $647, mostly because of charges the company had to take to refinance debt.
Level 3 also forecast flat revenue for Q2.
Level 3’s management has a long-time habit of cutting its own throat. Refinancing debt improved that balance sheet and moved the stock up recently. But, with poor operating results, who cares?
Douglas A. McIntyre
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