Earnings Preview for Global Crossing Q4/09

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