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Level 3 Communications ’ ( LVLT ) stock jumped on stronger-than-expected free-cash-flow guidance after the telecom service provider early Thursday reported Q4 EPS that was a penny above Wall Street views, excluding a tax benefit. Revenue, though, just missed expectations. Some observers have speculated that Level 3 could announce a share repurchase program in 2016. Level 3’s guidance “suggests LVLT will be in a strong position to pursue strategic opportunities or buybacks,” said UBS analyst John Hodulik in a research report. Level 3 stock was up 6.5% in afternoon trading in the stock market today , near 50, but shares of the business service provider are still down 7% in 2016. Broomfield, Colo.-based Level 3 closed its $5.3 billion acquisition of TW Telecom in late October 2014. Thursday, Level 3 said it earned 53 cents in the December quarter, swinging from a 24-cent loss in the year-earlier period. Revenue rose 7% to $2.053 billion. Analysts polled by Thomson Reuters expected per-share profit of 52 cents and revenue of $2.06 billion. Level 3 said it expects 2016 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to rise 9% to 12%. It forecast 2016 free cash flow — net cash from operating activities minus capital expenditures — of $1 billion to $1.1 billion. “EBITDA and FCF guidance easily outpaced expectations, and likely reflects the accelerated pace of (merger) synergy realization,” said Jefferies analyst Scott Goldman in a research report. Prior to TW Telecom, Level 3 bought Global Crossing for $1.9 billion in late 2011. At a UBS conference in January, Level 3 executives said they were studying possible shareholder returns as well as possible acquisitions. Level 3 might pursue privately held XO Communications, Cowen & Co. analyst Colby Synesael said in a research note. Synesael says Level 3 could be a takeover candidate itself, with cable TV firm Comcast ( CMCSA ) the buyer. “2016 guidance including color around expected revenue growth acceleration and better than expected FCF are a positive,” Synesael wrote. In the content delivery network market, Level 3 competes with Akamai Technologies ( AKAM ). Image provided by Shutterstock . Scalper1 News
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