WCOM WATCH - Looks pretty safe here too, so buying some for my long term account.
WorldCom (WCOM) 7.73 +1.04: A look at the three-month chart on WorldCom shows that 2002 has been a tough year to this point. In less than a month, the shares have fallen as much as 60% from a high of 15 to yesterday's low at 6. In fact, a chart on the last half decade indicates that yesterday, WCOM hit its lowest price in five years. Several issues could be cited for the pronounced weakness. Enron's nosedive from eighty dollars to eighty cents has generally heightened concerns over liquidity and made investors more sensitive to the prospect of accounting issues. From an industry standpoint, recent bankruptcies in the space, in addition to slowing data revenues at various competitors, have also served to keep a lid on the stock. Yet believe it or not, shares of WorldCom are headed higher this morning. The company reported $0.13 per share, missing the consensus estimate by a penny. At the same time, fourth quarter revenues rose 7.1% to $5.30 billion versus the consensus estimate of $5.47 billion. Looking forward to fiscal 2002, management now projects revenue and EBITDA growth in the mid-single digit range and pro forma earnings in the range of $0.75 to $0.80. But perhaps more importantly, the company clarified its accounting practices. WorldCom has off-balance sheet financing in the form of a receivables purchase program -- it conducts the program at more favorable interest rates than other forms of commercial bank financing. At the end of 2001, the balance for this program was $2 billion and its size has increased by less than $50 million over the last two years. As a consequence, Merrill Lynch released a research note this morning stating the detail on this program confirms that improvements in accounts receivable and days sales outstanding (DSO's) are "bona fide". The second big issue WorldCom addressed is this matter of liquidity. The company has $1.4 billion in cash and cash equivalents and an additional $8 billion of unused bank lines of credit -- at the same time, its scheduled debt maturates in 2002 stand at only $172 million. In addition, WorldCom expects to generate $1 billion in free cash flow in 2002 which should allow it to pay down some debt if it chooses. -- Mike Ashbaugh, Briefing.com |
