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UBS says Qwest may be a takeout candidate; shares up UBS upgraded Qwest Communications
International Inc. to "buy" from "neutral," and said the company
could be a takeout candidate for one of the rural telephone
operators, sending its shares up as much as 5 percent. Reuters December 15, 2009 The brokerage also cited the company's stable
cash flow, improving revenue trends and attractive valuation for
its upgrade. "Despite its
much larger size, we believe Qwest could become a takeover
candidate for one of the rural local exchange carriers (CenturyLink
(CTL.N)
or Windstream (WIN.O))
looking to gain scale," analyst John Hodulik said in a note to
clients. With the rapid
consolidation in the rural telephone market, where operators are
having to merge in order to grow revenue, the analyst said. In November,
Windstream Corp agreed to buy Iowa Telecommunications (IWA.N). Hodulik expects
Qwest to be a prime beneficiary of a business market recovery as
the company has about 41 percent of its total revenue exposed to
the segment. The analyst
expects fundamentals in the business and wholesale markets to
improve in 2010 after less than stellar results in 2009. "We believe
improvement in revenue trends will cause the Street to refocus
on the cash, which we expect to remain strong through 2011,"
Hodulik said. The analyst
raised his price target on the stock to $5.50 from $3.80. Shares of the
company rose 21 cents, or 5 percent, to $4.29 in morning trade
on the New York Stock Exchange. (Reporting by
Shrutika Verma in
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