Tw telecom inc. Earnings Cheat Sheet: Margins Shrink as Net Income Drops

tw telecom inc. (NASDAQ:TWTC) reported its results for the third quarter. Tw telecom is a national provider of managed network services. It specializes in Ethernet and data networking, Internet access, local and long distance voice, VPN, VoIP and network security services.

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tw telecom inc Earnings Cheat Sheet for the Third Quarter

Results: Net income for tw telecom inc. fell to $14.6 million (10 cents per share) vs. $16.1 million (10 cents per share) a year earlier. This is a decline of 9.2% from the year earlier quarter.

Revenue: Rose 7.5% to $344.5 million from the year earlier quarter.

Actual vs. Wall St. Expectations: TWTC fell in line with the mean analyst estimate of 10 cents per share. Analysts were expecting revenue of $343.9 million.

Quoting Management: “We’re pleased that we’ve driven increased revenue growth, greater Modified EBITDA and higher Unlevered Free Cash Flow(AMEX:TWO) than last year,” said Larissa Herda, tw telecom’s Chairman, CEO and President. “Delivering on any one of those metrics is an accomplishment, but growing all three as we invest for the future, demonstrates the strength of our model and our execution. Over the past year and a half we’ve deployed numerous products and features to meet our customers’ rapidly changing requirements, and this quarter we introduced the first phase of our Intelligent Network offering. Our product investments are paying off and we plan to further invest in additional innovative capabilities to deliver faster, better, and easier network solutions to serve our customers’ dynamic needs.”

Key Stats:

The company has now fallen in step with estimates for the last three quarters. It reported net income of 9 cents in the second quarter, net income of 8 cents in the first quarter and net income of 11 cents in the fourth quarter of the last fiscal year.

Gross margin shrank 0.3 percentage point to 58.1%. The contraction appeared to be driven by increased costs, which rose 8.2% from the year earlier quarter while revenue rose 7.5%.

Revenue has risen the past four quarters. Revenue increased 6.8% to $338.4 million in the second quarter. The figure rose 6.9% in the first quarter from the year earlier and climbed 5.5% in the fourth quarter of the last fiscal year from the year-ago quarter.

Looking Forward: The average estimate for the fourth quarter remains unchanged at 11 cents a share. In the last thirty days, the average estimate for the fiscal year has moved up from 38 cents per share to 39 cents.

Competitors to Watch: Level three Communications, Inc. (NASDAQ:LVLT), AT&T Inc. (NYSE:T), CenturyLink, Inc. (NYSE:CTL), Cbeyond, Inc. (NASDAQ:CBEY), AboveNet, Inc. (NYSE:ABVT), Verizon Communications Inc. (NYSE:VZ), PAETEC Holding Corp. (NASDAQ:PAET), Cincinnati Bell Inc. (NYSE:CBB) and Sprint Nextel (NYSE:S).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)