UBS Cuts Price Target on CenturyLink (CTL) Following 3Q and Announced Acquisition
UBS maintained a Buy rating on CenturyLink, Inc. (NYSE: CTL), and cut the price target to $31.00 (from $36.00), following the company's 3Q and announced acquisition of LVLT for $66.50/sh. UBS estimates that this deal would finally bring CTL's top line to stability while synergies would be meaningful. CTL's 3Q results missed estimates largely due to lower legacy revenues. Management suggested 2016 core revenues will be at the low-end of its range while total revenues will be slightly lower than originally expected on lower CPE sales.
Analyst Batya Levi commented, "CTL is acquiring LVLT for $66.50/sh in a 60/40 stock/cash deal, equating to 10.9x 2017E EBITDA vs. 11.5x LVLT paid for TWTC in 2014. Pro forma company would be the 2nd largest player in the business communications space with 20% market share in Enterprise/SME, behind AT&T at 30% and vs. VZ at ~20%. We believe the deal would significantly improve CTL's on-net fiber connectivity and its cost structure."
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Shares of CenturyLink, Inc. closed at $26.58 yesterday.