On Tuesday morning, TW Telecom reports Q2 2008 earnings. TW Telecom is perhaps of the most solid of the nextgen fiber-based telecoms. And this earnings call could usher in a new era for them: positive earnings. Not positive EBITDA, or positive cash flow, they’ve had those for quite some time now. This quarter they may cross the threshold to real honest-to-god positive GAAP earnings. The street seems to be expecting EPS of $0.01, but it will be close, no guarantees.
TW Telecom has had very consistent revenue growth each quarter. Their internet and data revenues are growing very rapidly, while their voice revenues grow more slowly and their carrier network services revenues have been declining slightly. Here is a quick table summarizing what my model projects for Q2:
|Adjusted Gross Margins||57.6%||57.8%|
According to the estimates on Yahoo Finance, the street is expecting revenue a bit higher than I am, at $289M. With the SME telecom market showing a bit of weakness, I don’t think anyone ought to expect a blowout quarter for TW Telecom which is dependent on it. Their deep fiber footprint should give them some insulation, however they do lease a fair amount from the ILEC, especially in their acquired markets. The company is looking to reach ‘mid-thirties’ EBITDA margins this summer, but summer really means Q3, so I think we just see another step along the way.
And then there’s the fact that TW Telecom never really surprises. Not on the upside, not on the downside. Their progress has been stable to the point of boring, which of course is precisely why they are on the verge of positive earnings whereas others are not.
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