Qwest CEO reiterates outlook
Save for a major depression or an obstacle to entering the long-distance market, Joe Nacchio says he has no intention of reducing earnings estimates for his company anytime soon.
Speaking at the U.S. Bancorp Piper Jaffray conference here, Nacchio said the company sees cash earnings per share between $1.10 and $1.20 for 2001, and at $1.40 for 2002. Revenue should grow between 14 percent and 15 percent in 2002, and earnings before interest, taxes, depreciation and amortization should grow between 15 percent and 17 percent, he said.
Of course, there are a few factors that could prevent the company from meeting those goals, Nacchio added.
"When the economy turns into a 1929 depression, we'll probably miss our numbers," he said.
The company could also miss numbers if it is unable to get permission to enter the long-distance market in any of the 14 states in which it currently offers local services. But he said he expects to get approval to offer services in the first state early in 2002.
Nacchio seemed to think he needed to reaffirm guidance to counter "whisper numbers" about his company's financial position on Wall Street. He railed against a "vendetta" against Qwest by a "major firm on Wall Street," urging investors to "read more than one report."
Qwest's stock plunged in June after analysts at Morgan Stanley said the company may be using accounting techniques to improve its earnings growth. Nacchio vigorously defended the numbers at the time, and most of the other Wall Street analysts have come down on his side.
But new concerns have arisen over the way the company accounts for capacity sales and the costs associated with those sales. Critics have complained that Qwest books sales of capacity as revenue, but treats the costs associated with buying or building the capacity as a capital expense, keeping it off the income statement.
Other factors have also hurt the stock. Qwest competitor Global Crossing last week cut its growth targets, and earlier in the year, BellSouth sold back to Qwest 22.2 million of the 74 million shares that it owned in the company.
But Thomas Weisel Partners analyst Jim Linnehan said Monday that the sell-off in recent weeks has created a buying opportunity in the stock.
Nacchio said it was "amazing" that his company's shares were trading at a discount to Baby Bells, pointing out that "we are an RBOC (regional Bell operating company)." Qwest owns US West as well as a fiber-optic network, making it a hybrid telecommunications company.
"You've got a good industry slowdown happening, but there are people who'll do well," he said. "It isn't like we'll all go under."
Looking forward, Nacchio said his company's growth will come from both its long-distance and regional businesses. The long-distance business, which makes up only about 30 percent of Qwest's revenues, should see 30 percent revenue growth in the next year, while the company's traditional regional bell operating business should see revenues grow by 8 percent.
Qwest shares fell 29 cents to $24 Tuesday.
U.S. Bancorp scheduled a Webcast of the keynote speech for 9:15 a.m. PDT, but a technology glitch delayed the Webcast for nearly three hours. Dana Wade, a spokeswoman for U.S. Bancorp, said the presentation was given at the World Trade Center, where technicians encountered problems with the phone lines that were not resolved in time.
News.com's Sam Ames contributed to this report.