D.A. Davidson Sees Integration Staying on Track for Level 3 Communications

In a report published Thursday, D.A. Davidson analyst James G. Moorman reiterated a Buy rating and $54.00 price target on

. In the report, D.A. Davidson noted, “LVLT reported roughly in line revenue growth, lower costs, and better EPS in Q3. Core Network Service (CNS) revenue grew 5.8% year-over-year (YoY) with Enterprise up 9.1% and Wholesale down 0.3%. North American enterprise grew 11.6% and Latin America enterprise increased 8.6%. A full breakdown of the revenue growth is on page 3. Gross margins were 62.7%, up 40bp from Q2 levels. SG&A was $52 million lower than we expected, but included $7 million in one-time transaction-related fees and a $10 million benefit for adjustments to accrued liabilities for tax and legal matters. EBITDA was $471 million, $17 million better than our estimate and up 13.5% YoY. Reported EPS was $0.35, compared to consensus of $0.31 and $0.12 last year.” Level 3 Communications closed on Wednesday at $46.84.