Qwest cuts outlook and profit boosted by tax benefit
NEW YORK (Reuters) - Phone company Qwest Communications International Inc (Q.N) on Tuesday cut its earnings outlook for the year, sending its shares down 4 percent, though its quarterly profit rose with the help of a tax benefit and cost cuts.
Qwest reported a third quarter profit of $2.1 billion, or $1.08 per share, including a $2.15 billion income tax benefit and $353 million in charges related to the settlement of a shareholder litigation case. A year earlier, it posted a profit of $194 million, or 9 cents per share.
Excluding the tax benefit and legal charges, earnings were 14 cents per share, a penny below average Wall Street expectations, according to Reuters Estimates.
The company also lowered its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) forecast for the full year, saying it expected it improve around $250 million from the year-earlier adjusted EBITDA of $4.3 billion.
Qwest had previously forecast an improvement of up to $400 million from a year ago.
The stocks fell to $7.85 in pre-market trade from its New York Stock Exchange close on Monday at $8.18.
In spite of the market's negative reaction, Bank of America analyst David Barden said Qwest's announcement that its board approved spending $300 million on new initiatives was reassuring.
"On balance, we believe limiting incremental spend to only $300 million would still be a positive versus worst-case fears of an imminent large-scale spend to support video," he said in a note to clients.
Bigger phone companies like AT&T Inc (T.N) and Verizon Communications Inc (VZ.N) have been investing in expensive network upgrades to sell video and compete with cable television providers.
Qwest's operating revenue fell 1.5 percent to $3.43 billion. Analysts on average expected revenue of $3.49 billion, according to Reuters Estimates.
Data showed its wholesale segment was particularly weak. Wholesale long-distance revenue fell 19.1 percent from a year-earlier. Total voice revenue fell 8.0 percent to $2.0 billion, although that was somewhat offset by a 9.7 percent gain in Internet and video revenue to $1.3 billion.
The company, which has struggled over the past few years to reduce massive debt, said net debt dropped to $13.3 billion at the end of the quarter, down $134 million from June 30.
The company executed 58 percent of an approved $2 billion share buyback plan through the end of the quarter.
Many investors have been expecting Qwest to announce a dividend payment due to the company's improving cash flow, but Tuesday's statement did not include such an announcement.
(Reporting by Ritsuko Ando)
