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NEW YORK (TheStreet) --Shares of Frontier Communications Corp. (FTR) - Get Free Report closed higher today by 2.99% to $7.93 on more than seven times the average trading volume, as one analyst raised its price target after the company said it would buy wireless assets from Verizon (VZ) - Get Free Report  for $10.54 billion.

D.A. Davidson upped its price target on the stock to $7 from $5.50 following the deal announcement, while maintaining its "underperform" rating. The Verizon properties to be sold include 3.7 million voice connections, 2.2 million broadband connections, and 1.2 million FiOSvideo connections.

"This is a solid deal, if they can attain synergies. The properties have higher exposure to fiber compared to their current footprint, which we see as a positive, but a lot of the value is based on synergies that can only be attained at least a year from now. So we are a little skeptical about the synergies being achieved," analysts noted.

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Accordingly, D.A. Davidson increased their multiple to 6.5x from 6.3x multiple and applied it to their new 2016 EV/EBITDA estimate of $2,432 million. Their $7 price target equates to a 6% yield. Analysts concluded that the stock is "slightly overpriced" at its current 5.5% yield.

About 71.2 million shares changed hands by the market close in New York, compared to the average of 9.08 million shares.

Separately, 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 multiple 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, solid stock price performance, expanding profit margins and notable return on equity. 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 exceeded that of the S&P 500 and greatly outperformed compared to the Diversified Telecommunication Services industry average. The net income increased by 18.6% when compared to the same quarter one year prior, going from $35.40 million to $41.99 million.
  • Compared to its closing price of one year ago, FTR's share price has jumped by 39.21%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • 43.79% 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.
  • FRONTIER COMMUNICATIONS CORP reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over 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 ($0.20 versus $0.12).
  • FTR, with its decline in revenue, slightly underperformed the industry average of 2.5%. Since the same quarter one year prior, revenues slightly dropped by 3.7%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • You can view the full analysis from the report here: FTR Ratings Report

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