S&P maintains buy opinion on Centurytel Shares (CTL)
CTL agrees to acquire fellow rural telco Embarq (EQ; 29.70) in a stock-based deal worth more than $40 a share, pending necessary approvals expected in mid 2009. Despite pressure on its access line base, we believe EQ generates strong cash flow but has cost inefficiencies. CTL's third quarter results of $0.82, vs $0.96, $0.01 ahead of our estimate, reflect a more stable customer base, slight EBITDA margin pressure, and share buybacks. However, we see CTL reserving its cash flow to support the deal and its dividend. We will update following a morning call on the potential deal benefits. -T. Rosenbluth
S&P maintains buy opinion on Verizon Communications Shares (VZ)
Before one-time items, VZ posts adjusted third quarter EPS of $0.66, vs. $0.63, a penny above our estimate. Revenues were slightly ahead of our forecast, while EBITDA was slightly below. Despite economic and competitive pressure that we contend led to 9% access line losses, we are encouraged by VZ's strong 1.5 million organic wireless additions and the continued rollout of its Fios offerings. We look to VZ's morning call to see if there are changes to pending acquisition of Alltel due to the tight credit market or signs of slowing corporate demand for VZ's offerings. -T. Rosenbluth.
S&P reiterates buy opinion on shares of Humana (HUM)
Third quarter operating EPS of $1.49, vs. $1.78, is $0.01 above our estimate. Operating revenue rose 15% on 20% more Medicare Advantage members, partly offset by 11% fewer Medicare drug plan members. We like disciplined pricing we see for 2009, which we expect will lead to fewer higher-cost Medicare Advantage and drug plan members, and help lower its medical loss ratio. Despite investment losses, we view HUM as well capitalized. We cut our 2008 EPS estimate $0.10 to $4.30 on lower investment income. Applying peer-level 8 times to our $5.70 2009 EPS estimate, we cut our target price by $7 to $46. -P. Seligman
HOLD/NEUTRAL :
S&P maintains hold recommendation on shares of Citigroup (C)
According to an unconfirmed Financial Times report, Citi was approached by Goldman Sachs (GS; 100.40) in September about the possibility of merging the two firms. The call reportedly did not result in further talks; however, the initiation of a conversation, in our opinion, points to the severity of the credit crisis. We think Citi is better suited acquiring a U.S.-based bank for deposit purposes. Separately, given the severity of the credit turmoil, we are wary of further securities writedowns. As a result, we lower our target price by $2 to $15, below-historical 0.83 times book value. -S. Plesser
DOWNGRADE :
S&P Reiterates sell opinion on shares of General Motors (GM)
We continue to have a negative view of the prospects, were GM to merge with privately held Chrysler. Not only do we not think that it would meet its likely goals, but we believe integrating two troubled businesses will compound their difficulties. Given shrinking global vehicle demand, we think GM's cash drain is likely to rise as losses mount, leaving insufficient time to achieve merger cost savings through facility and employee reductions. GM needs a cash infusion, and with poor equity and debt market options, we do not rule out a Federal investment or infusion. -E. Levy-CFA
Related Posts :
Sources :
- Business Week: S&P Picks and Pans: GM, CenturyTel, Verizon, Citigroup, Humana, October 27, 2008, 11:00AM EST
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