Level 3 Communications (LVLT) announced second quarter 2012 results on July 25 reporting anemic top line revenue growth resulting in a sell-off. The stock closed down $1.98 or 9.7%. Was the sell-off warranted? We’ll look at reported revenue then calculate the minimum revenue growth in the second half of 2012 required to meet EBITDA and FCF (Free cash flow) guidance reiterated management.
What spooked the market was core network services revenue grew $4 million from $1382 million in Q1 to $1382 million in Q2 or 0.29%. This is equivalent to a yearly growth rate of 1.1%; a rate that will not support current price levels. If this is the new norm than the selling is warranted but is it? The answer lies in EBITDA and FCF guidance….
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