GLOBAL CROSSING (GX: $7) 8/2/01
2Q Results Weak: Lowering Revs 10%, EBITDA 16% And Rating To Hold From Buy
Annual EPS Prev. EPS
12/01E (3.09)
12/00E (2.69)
March
Rating: HOLD Change: 12-Mo. Target: $14
On Wed eve, GX reported total cash revs of $1,620M(+26%), 2% below our fcst of $1,649M (+28%) driven by weaker Telecom ServicesCash revenue of $1,458M (up 25% y/y, a deceleration from 1Q's and our fcst of 30%) which, in turn, is due primarily to recurring data svcs rev growth not ramping as orig planned (it grew only 44% vs our 100% fcst) -- partially offset by strong deferred IRU rev though this was boosted by approx. $345M of swaps which alone comprised a huge 21% of total cash revs.
Adj EBITDA of $472M was 3% above our fcst, driven almost entirely by better-than-exp deferred IRU revs of $551.5M, up 79% y/y and $120M ahead of our $431M est. In contrast, GAAP EBITDA loss of $85M was down $110M y/y and $113M below our $28M est.
Citing industry and economic pressures, GX lowered its '01 cash rev tgt 8% to $6.4-6.9B (down from prior $7.1-7.3B and our $7.1B), lowered recurring svcs rev tgt 13% to $4.4-4.5B (down from prior $5.0-5.3B and our $5.3B), and lowered adj EBITDA tgt 12% to $1.6-2.0B (down from prior $2.0-2.1B and our $1.9B).
Despite lowering estimates on June 15th, we are again lowering our '01 ests, reducing our cash rev est by 10% or $700M to $6.4B and our adj EBITDA est by 16% or $300M to $1.6B. Also lowering our '01 capex est by $500M to $4.5B, consistent with the co's new forecast.
We are lowering our rating to Hold from Buy given multiple negative factors: slowing industry demand, unpredictable pricing, lower than expected recurring revs-all of which have translated into disappointing recurring revs, and increased dependence revs derived from capacity swaps. |
