DA Davidson Upgrades Level 3 Communications (LVLT) to Buy, Stronger Following GLBC Acquisition
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Price: $53.63 --0%
Rating Summary:
14 Buy, 12 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
14 Buy, 12 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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DA Davidson upgraded shares of Level 3 Communications (NASDAQ: LVLT) to a Buy rating from its previous rating of Neutral. The firm's $1.70 price target calls for a 19 percent upside.
Following the close of the GLBC acquisition, the firm now believes that LVLT's revenue will be able to grow at a mid-single digit pace over the next two years. DA Davidson notes that a with 70 percent of their revenue exposed to North America, a recovery would accelerate that growth rapidly.
The firm reports that they have calculated in $104 million in operating cost synergies into its 2012 estimates and another $140 million into its 2013 estimates. DA Davidson believes that management will focus on implementing GLBC into its current business over the next few quarters and could possible acquire another firm during that time to strengthen its sales force.
An analyst at DA Davidson comments, "LVLT’s debt to EBITDA ratio was 7.7x on Q2 debt levels of $7.2 billion. With the GLBC acquisition, we expect debt to EBITDA to fall to 5.6x on our 2012 pro-forma EBITDA of $1.55 billion. LVLT still has ~$950 million in convertible debt with strike prices of $1.80 per share or less, which should convert into stock over the next few years and decrease debt to EBITDA further to slightly less than 5x."
For more ratings news on Level 3 Communications click here and for the rating history of Level 3 Communications click here.
Shares of Level 3 Communications closed at $1.41 yesterday.
Following the close of the GLBC acquisition, the firm now believes that LVLT's revenue will be able to grow at a mid-single digit pace over the next two years. DA Davidson notes that a with 70 percent of their revenue exposed to North America, a recovery would accelerate that growth rapidly.
The firm reports that they have calculated in $104 million in operating cost synergies into its 2012 estimates and another $140 million into its 2013 estimates. DA Davidson believes that management will focus on implementing GLBC into its current business over the next few quarters and could possible acquire another firm during that time to strengthen its sales force.
An analyst at DA Davidson comments, "LVLT’s debt to EBITDA ratio was 7.7x on Q2 debt levels of $7.2 billion. With the GLBC acquisition, we expect debt to EBITDA to fall to 5.6x on our 2012 pro-forma EBITDA of $1.55 billion. LVLT still has ~$950 million in convertible debt with strike prices of $1.80 per share or less, which should convert into stock over the next few years and decrease debt to EBITDA further to slightly less than 5x."
For more ratings news on Level 3 Communications click here and for the rating history of Level 3 Communications click here.
Shares of Level 3 Communications closed at $1.41 yesterday.
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