In a report published Thursday, Raymond James analyst Frank G. Louthan IV upgraded the rating on Frontier Communications Corp (NASDAQ: FTR) from Market Perform to Outperform, with a $6 price target. The sell-off in May positively affected the stock's risk/reward profile, creating an attractive buying opportunity.
The company launched its equity offering, including $750 million in common stock, along with mandatory convertible preferred stock worth $1.75 billion to help finance the purchase of assets in Florida, Texas and California from Verizon Communications, Inc. (NYSE: VZ).
The analyst expects the deal to be closed in 1H16, without any regulatory hurdles. This deal has been favorable for Frontier Communications' risk/reward profile over the next 12 months.
"We believe the company's poor 1Q results in early May exacerbated what was likely to be added pressure on the stock given its telegraphed equity financing announced back in February. With the stock off ~20 percent for the month of May, we believe the likely accretion from its Verizon acquisition make for an attractive buying opportunity," Louthan said.
The analyst expects the Verizon deal to be accretive for Frontier Communications, which is likely to drive the share price up from the current levels.
At the same time, the Raymond James report also said that "Frontier's recent business trends have been worse than expected and there is still a lot of time before the deal closes (potentially ~12 months), in which the company could see additional headwinds, the Verizon properties could worsen, or some combination. Additionally, Frontier also has to raise ~$8.35 billion of debt to fund the deal."
Latest Ratings for FTR
|Jun 2015||Raymond James||Upgrades||Market Perform||Outperform|
|Jun 2015||DA Davidson||Upgrades||Neutral||Buy|
|May 2015||Morgan Stanley||Upgrades||Underweight||Overweight|
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- DA Davidson Upgrades Frontier Communications, Cuts Price Target
- Morgan Stanley 'Double' Upgrades Frontier Communications
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