Piper Jaffray Initiates Coverage on Centurytel (CTL) with a Buy; Upside Created From Embarq Merger

April 24, 2009 8:15 AM EDT
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Price: $11.00 --0%

Rating Summary:
    5 Buy, 15 Hold, 10 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 18 | Down: 12 | New: 23
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Piper Jaffray & Co. initiates coverage on Centurytel (NYSE: CTL) with a Buy. Price target $30.

Piper analyst says, "CenturyTel is merging with Embarq, creating the largest RLEC. We believe the Street is not including the $400 million in annualized run-rate synergies into estimates; we also believe the synergies are beatable. We think this could give us free cash flow upside of $0.75, or 2.0% to our free cash flow yield. We expect the merger to close in 2Q – most of the approvals have already been met. CTL is already the best FCF yielding RLEC. CTL currently trades 100bps of higher yield which is due in part to concerns of the Embarq merger and the arbitration set-up on the deal. In addition, management is very prudent with cash, in our opinion."

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CenturyTel, Inc., together with its subsidiaries, is an integrated communications company engaged primarily in providing an array of communications services, including local and long distance voice, Internet access and broadband services.

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