Q4 Earnings Preview: tw telecom

February 7th, 2012 by · 5 Comments

On Thursday morning, TW Telecom (NASDAQ:TWTC, news, filings) will report its fourth quarter and full year 2011 earnings.  Unlike Level 3, which reports on Wednesday and which I previewed in a post yesterday, tw telecom is not in the midst of a big internal integration project and there is not much mystery in what they're likely to say.  The financial markets have been favorable to them lately, boosting their stock price above $20 again though, which suggests perhaps there will be more people watching this release than in recent quarters.  Here's a quick table of my projections for tw telecom's Q4 results in the context of the past four quarters:

($ in millions) Q4/10 Q1/11 Q2/11 Q3/11 Q4/11

(estimate)

- Data & Internet Services 145.1 152.2 158.2 164.7 171
- Network Services 89.5 89.5 88.9 86.9 87
- Voice Services 81.9 83.0 83.6 85.2 84
- Intercarrier Compensation 8.3 7.8 8.7 7.7 8
Total Revenue 324.8 332.5 338.4 344.5 350-351
M-EBITDA 119.4 121.4 123.2 125.0 127.5
M-EBITDA Margin 36.7% 36.5% 36.4% 36.3% 36-37%
Earnings per share 0.11 0.08 0.09 0.10 0.11
Revenue Churn 1.0% 1.0% 0.9% 1.0% 1.0%
Capital Expenditures 78.1 79.3 90.9 86.0 80-90
On-net buildings added 537 512 569 561 ~500
Free Cash Flow 26.4 26.1 16.5 23.2 20-30

My own projections are just a tad higher than the street seems to peg them at, as I think tw is poised for a bit of acceleration and Q4 seems the likeliest time to get a hint of it.  There is no indication that the macro economy is hurting the metro fiber business, and in fact there have been indications that incumbent providers have other priorities and thus there is perhaps an opportunity to gain share at present.

This quarter, tw telecom will very likely have passed the 15,000 on-net building milestone, more than 2,000 higher than at the end of last year.  I will be curious to see if they keep up this pace of 500 buildings added per quarter and whether they intend to do the same in 2012.  This has been a material change in their strategy over prior years that may not yet have been fully reflected in the company's rock-steady results.

That being said tw telecom has been growing very consistently with annual increases in the high single digits for some time.  While it's tempting to hope they might push that into double digits this year, history says this train doesn't change speed quickly so even if there is a shift it will likely be subtle.

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Categories: Financials · Metro fiber

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5 Comments So Far


  • DP says:

    It looks like while your estimates are higher than the street’s tw beat almost all of them today yet the stock is slightly down. Odd.

  • CarlK says:

    Robert, have you decided to refrain from commenting on their report that was released? Are you O.K.?

    Otherwise, I am thinking that Buddy Miller is licking his chops and some MNA is having the finishing touches take place.

    The combination of their nearly par stock prices as well as market caps including shares outstanding for each, make a melding of this earlier MFS lieutenant under Crowe, seem quite compelling.

    I was mad as hell that we hadn’t gobbled up some one new yet. LVLT must ROLL UP and CONSOLIDATE this industry to internet nirvana for the benefit of the hard work and massive amounts of capital that “backbone and infrastructure” owners have laid down for more than a decade!

    “Bring it on!” 🙂

    http://finance.yahoo.com/news/tw-telecom-Reports-Fourth-prnews-1863681387.html?x=0

  • Rob Powell says:

    Err, CarlK I did in fact follow up after earnings came out! http://www.telecomramblings.com/2012/02/faster-growth-for-tw-telecom-in-q4/

    As for Buddy Miller licking his chops, I don’t see Level 3 being ready to make any sort of move on tw. There are far better candidates outside the US while they integrate.

  • CarlK says:

    Thanks! Don’t know how I missed that! Historically low,
    reduced churn with steady top line growth does seem impressive. Their building adds will be more impressive when they are comprised predominantly of “ON NET” services, i.e. The Margin.

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