Nomura Securities Upgrades Frontier Communications (FTR) to Buy; Red Flags Should Return to Half Mast

Nomura Securities upgraded Frontier Communications (NASDAQ: FTR) from Neutral to Buy, price target raised from $4 to $5.

Analyst, Mike McCormack, said, "With a current 10% dividend yield, a ~20% free cash flow yield, and elevated short interest, we think there is little optimism reflected in the shares. Small progress on refinancing debt maturities could transform the firm’s risk profile. We have a high degree of confidence that free cash flow can be supported with cost cutting, despite a revenue outlook of ~7% decline in 2012. Compared with peers, we view Frontier’s 50% dividend payout ratio as conservative, allowing for the current ~250bps dividend yield spread to peers to narrow. At a peer level 8% dividend yield, FTR shares would be valued near $5. 2012E EPS $0.22 vs. Street at $0.24."

For an analyst ratings summary and ratings history on Frontier Communications click here. For more ratings news on Frontier Communications click here.

Shares of Frontier Communications closed at $4.17 yesterday.

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