Qwest Communications (NYSE: Q), a telecommunication concern which counts Verizon (NYSE: VZ), AT&T (NYSE: T) and Sprint Nextel (NYSE: S) as esteemed colleagues, issued its Q3 numbers on Wednesday. What do they tell us? Well, for the most part, the numbers, and perhaps more importantly to some extent, the price action, tell us that we should stay away from this low single-digit stock.
Revenues went down roughly 2%. Earnings per diluted share, which came in at $0.09, took a huge dive of 93% on a GAAP basis, but this was driven by a significant tax benefit booked in Q3 2007. Looking at adjusted EBITDA, we see that the drop wasn't so large: Qwest posted $1.08 billion for this metric versus $1.15 billion in the year-ago period. Management didn't see fit to beat expectations, as the call was for $0.10 per share.
However, the company delivered $330 million in adjusted free cash flow, which is representative of a flat growth rate. Hey, the fact that free-cash generation didn't really go down is pretty cool in this case. Management promoted its shareholder-friendly initiatives of dividends and share buybacks in the release. Unfortunately, they aren't enough to bring me to the table where this stock is concerned.
Is Qwest a value, a turnaround in the making, perhaps? Well, it is a complex subject. Back in August, Steven Halpern reported on an analyst's comments regarding Qwest and its potential as a company that might come back at some point. I mean, sure, that isn't beyond my imagination. I look at the assets and realize that Qwest may not always be stuck in single-digit-stock-price land.
But you don't want to be gambling with the shares at this point in the global downturn. Qwest is looking to get rid of 1,200 jobs, the outlook isn't great, and the stock is, quite simply, not worth the risk. Forget the high yield, forget the turnaround argument, forget Qwest.
Disclosure: I don't own any company mentioned; positions can change at any time.
Entrepreneur's Journal: Want to get a piece of the Buffett/Goldman honeypot?
The week in preview: No turkey earnings from Tyson, Hormel, Cracker Barrel ...
Comfort Zone Investing: Intel is saying something ... can you hear it?
