CenturyLink climbs after Morgan Stanley upgrade

CenturyLink climbs after Morgan Stanley upgrade; analyst sees cost savings, potential buybacks

• On 12:14 pm EDT, Wednesday September 23, 2009

NEW YORK (AP) -- Shares of CenturyLink headed higher Wednesday after Morgan Stanley upgraded the stock, citing cost savings from the company's recent acquisition and the potential for share buybacks.

"We believe the Telecom sector offers very good value at current levels, and that CenturyLink is one of the best values in the sector," Morgan Stanley analyst Simon Flannery told investors in a note. He raised the company to "Overweight" from "Equal-weight."

CenturyLink, formerly known as CenturyTel Inc., completed its acquisition of Embarq Corp. in July, forming one of the largest traditional telephone companies in the U.S.

Flannery said, "CenturyLink has a strong track record of merger integration," possibly hitting cost savings goals ahead of schedule. The company expects to trim expenses with the deal by at least $475 million.

One sign of falling costs, Flannery said: CenturyLink expects a third-quarter profit of 78 cents to 82 cents per share. When it offered its forecast in August, analysts polled by Thomson Reuters had been expecting 78 cents, on average.

Flannery also cited CenturyLink's recent $650 million offering of 10-year and 30-year notes and its tender offer to buy back up to $800 million in notes due in 2010 and 2013. He said the refinancing moves "extend its maturities on favorable terms."

Once the merger integration and tender offer are through, CenturyLink may return to buying back shares by the second half of next year, Flannery said.

The company's stock rose $1.46, or 4.7 percent, to $32.75 in midday trading.

Buzz up!