NEW YORK (TheStreet) -- Frontier Communications (FTR - Get Report) shares are down -2.2% to $6.64 on Wednesday after being downgraded to "underweight" from "equal weight" by analysts at Morgan Stanley (MS - Get Report) who have a $5.20 price target of the company's shares.
The firm believes that the stock is vulnerable as it expects to see the communications industry face secular pressures in the short term.
The firm's price target represents a potential downside of 21.6%.
TheStreet Ratings team rates FRONTIER COMMUNICATIONS CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate FRONTIER COMMUNICATIONS CORP (FTR) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations, solid stock price performance, impressive record of earnings per share growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 198.0% when compared to the same quarter one year prior, rising from -$38.46 million to $37.68 million.
- Net operating cash flow has slightly increased to $328.26 million or 2.12% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -22.07%.
- Powered by its strong earnings growth of 200.00% and other important driving factors, this stock has surged by 52.19% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- FRONTIER COMMUNICATIONS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP reported lower earnings of $0.12 versus $0.14 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus $0.12).
- 45.12% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.28% trails the industry average.
- You can view the full analysis from the report here: FTR Ratings Report
EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he and Stephanie Link think could be potentially HUGE winners. Click here to see the holdings for FREE.