DA Davidson Upgrades Frontier Communications (FTR) to Neutral; Does the Stock Price Discount all the Bad News?

DA Davidson upgraded Frontier Communications (NYSE: FTR) from Underperform to Neutral, price target lowered to $6.00.

DA analyst says, "Revenue shrinkage is the problem - The acquired Verizon (NYSE: VZ) Midwestern properties lost lines in Q2 at a 10.2% annual pace, and due to the congestion problems with high speed data, FTR has not been able to slow or counter decline in landlines with more DSL net adds...According to management, the network congestion issue should be resolved by the end of October, which should allow FTR to start promoting DSL more in the VZ service area in Q4 and early 2012. FTR expects to have more DSL adds in Q3 than the 7,441 net adds in Q2."

"Debt refinancing in 2013 coming into focus: FTR’s debt maturities are manageable in 2011 and 2012 and we expect the company to use its $750 million revolver to refinance those maturities. However, we worry that drawing down on the revolver in Q3 to fund part of the dividend and the $200 million debt maturing in mid-October may spook investors....Reducing estimates for 2011 and 2012: We have built in $10 million of storm related repairs in 2H’11 as well as higher labor costs for the system conversion."

For more ratings news on Frontier Communications click here and for the rating history of Frontier Communications click here.

Shares of Frontier Communications closed at $5.92 yesterday.

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