Earnings Preview for Global Crossing Q4/09

February 16th, 2010 by · Leave a Comment

Tomorrow morning glbc will hold their earnings CC, which if their recent patterns hold means that they will be releasing the PR today after the market closes.   That of course means it's time for a quick earnings preview.  2009 wasn't a fun year for telecom as a whole, but when you discount currency fluctuations and consider the rest of the tough decade people at Global Crossing had already endured - I suspect they probably enjoyed it more than most.  Here's a quick table previewing my expectations for how Q4 went relative to the rest of 2009:

Q1/09 Q2/09 Q3/09 Q4/09 (est)
GCUK 107 113 117 125
GC Impsat 111 119 125 130
ROW 292 307 311 320
Total Invest & Grow 510 539 553 570-580
Wholesale Voice 98 94 89 85
Total Revenue 609 633 643 655-675
Cost of Revenue 430 432 443 445-455
SG&A 104 108 109 110-115
OIBDA 75 93 91 95-105
Earnings per share -0.99 0.43 -1.23 no idea
Free Cash Flow -32 -10 +52 40-90
Capital Expenditures 38 54 33 40

Revenues - There are several competing trends here.  On the positive side, the fourth quarter is traditionally a seasonally strong one for Global Crossing.  Coupled with improved (albeit not ideal) economic conditions, and there seems little risk of missing their full year 2009 guidance.  On the other hand, the economy isn't all the way back, and pricing pressure in some areas like IP transit has been increasing - especially in Europe where it could hurt their numbers some.  Most analysts peg their revenue in the $650 range this quarter, but I think that may be somewhat too pessimistic.  What can I say, I'm an optimist at heart.

Free Cash Flow - Generating positive free cash flow (guidance of $50-100M) has been an important goal for Global Crossing, and having come this far I doubt they will falter now with favorable working capital trends at their backs.  However, I am more interested now in any 2010 projections they might offer.  Will they increase capex levels from here in the interests of expansion or will they seek to increase their cash flow number further?

EBITDA - Guidance seems safe here also, and the key again is what they see in 2010.  $400M+ anyone?

Margins - This has always been Global Crossing's weakest spot. Their EBITDA and gross margins continue to lag behind the rest of the sector.  After finding paths to revenue growth and positive free cash flow, the next great challenge seems to be better operating margins, yes?

Consolidation - All year Global Crossing has been quite open about their interest in possible M&A, and I expect no change in their stance.  The likelihood of a deal is now much higher than it was last year simply because the bankers aren't currently contemplating their personal financial armageddon.

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Categories: Financials · Internet Backbones

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