Qwest keeps promise with strong earnings

The company says it beat earnings expectations and is on track for upcoming quarters thanks to strong growth in its Internet and data businesses.

3 min read
Qwest Communications International said Wednesday that it beat earnings expectations and is on track for upcoming quarters thanks to strong growth in its Internet and data businesses.

Shares in the broadband Internet communications company closed up $1.31 to $44.63 Tuesday ahead of the announcement.

The good results came as no surprise--this is the 15th consecutive quarter Qwest has met or exceeded consensus estimates, and the company had promised in December that its fourth quarter would meet expectations.

Though analysts are concerned that fourth-quarter results from some other communications companies like AT&T and WorldCom may be affected by the slowing long-distance business, Qwest is sheltered from such worries by its large stake in high-growth data and Internet businesses.

Fourth-quarter earnings, on a pro forma basis, were $270 million, up 43.6 percent over the fourth quarter of 1999. Earnings grew by 45.5 percent to 16 cents per diluted share. That's two pennies higher than First Call's consensus estimate.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter grew 19.7 percent to $1.99 billion.

Revenue for the fourth quarter was $5.02 billion, up 9.9 percent from a year ago, and slightly below a consensus estimate of $5.03 billion. Qwest said the growth was driven by strong demand for Internet and data services, which increased by almost 40 percent.

The company said it saw strong demand for Internet access, hosting, DSL (digital subscriber line), VPN (virtual private network), frame relay, ATM and professional services. Internet and data services revenue represented 70 percent of Qwest's total revenue growth in the quarter.

Wireless services revenue grew 90 percent in the quarter to $150 million. Commercial services revenue increased more than 19 percent, while consumer and small-business services grew by just 5 percent.

For the year, Qwest reported net income of $1 billion, up 53.6 percent from 1999, while 2000 earnings of 59 cents per share grew 51.3 percent from 1999. Pro forma EBITDA for 2000 increased more than 17.3 percent to $7.37 billion, despite large investments in areas such as hosting, local broadband access, Internet and data services, and service improvements, the company said.

Revenue for the fiscal year jumped 14.2 percent to $18.95 billion thanks to Internet and data services, which grew more than 60 percent in 2000. The company ended 2000 with more than 255,000 DSL customers, more than double the previous year and above the company's year-end target of 250,000.

CEO Joseph Nacchio said the company is "on track to meet our expected growth rates." The company is expecting $21.3 billion to $21.7 billion in revenue and $8.5 to $8.7 billion in EBITDA for 2001.

Rival Broadwing posts loss
Qwest rival Broadwing also reported fourth-quarter results Wednesday.

The company reported a loss of 18 cents a share, excluding charges, compared with a loss of 50 cents a year ago. First Call was expecting a loss of 20 cents a share. EBITDA improved 81 percent to $146 million. Including charges, Broadwing lost $1.26 a share.

Revenue increased 27 percent to $561 million. Results were on a pro forma basis as if the acquisition of IXC Communications had occurred at the beginning of 1999.

During the quarter, the company recorded a nonrecurring charge of $1.08 per share for a write-down of its portfolio of publicly traded securities. The charge had no effect on the company's cash position.