UPDATE: Macquarie Upgrades Frontier Communications (FTR) to Neutral
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(Updated - September 6, 2016 8:15 AM EDT)
Macquarie upgraded Frontier Communications (NASDAQ: FTR) from Underperform to Neutral with a price target of $4.75 (unchanged). Analyst Amy Yong said fears around integration and wholesale access are "largely digested at this point."
"Stability is all that’s needed for the dividend yield to reverse back to its 3-year historical average of ~7.5% (Fig 1). At 9.25% yield and 5.7x/4.0x EBITDA and FCF, integration risks and potential changes to wholesale pricing are now sufficiently in shares," said Yong.
Discussing integration, the analyst said, "Post a bumpy integration quarter, a normal marketing rhythm should resume this fall. We expect improved customer net adds in 3Q/4Q which we are modelling at -86k/-85k, as snowbirds return to FL. Current promos include a US$400 Amazon gift card to switch as well as a one-year Amazon prime subscription with certain packages. Frontier is also pushing attractive bundles which offer up to a 25% discount to customers .... Based on industry checks, we expect the FCC to address or publish an order on Special Access as early as November. Though there is limited detail around business solutions including pricing, our sensitivity analysis suggests that every ~1% decline in data would equate to a ~0.4% decline in '17E EBITDA."
Shares of Frontier Communications closed at $4.56 yesterday.
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