8 Telecom Stocks That Could Rise

NEW YORK (TheStreet) -- We have identified eight mid- and large-cap telecom stocks that could rise over the coming year.

We have selected these stocks based on average analyst price targets, according to Bloomberg. We have listed them in ascending order of potential upside, based on the average 12-month price targets from analysts.

8. Leap Wireless International ( LEAP), a wireless communications carrier, offers digital wireless services in the U.S. under the Cricket brand. The company's offerings provide customers with unlimited access to wireless voice and data services for a flat rate, without the need for a fixed-term contract or a credit check.

For the first quarter of 2011, the company reported net customer additions of 331,000 with average revenue per user (ARPU) improving 3.4% from the year-ago quarter. Total revenue for the quarter grew 14.1% to $779.9 million. The churn rate stood at 3.1% vs. 4.5% in the prior year's quarter. Meanwhile, voice churn rate recorded a decade-low 2.8% following upgrades to new data devices and adoption of new service plans.

Leap continually engages in enhancing its phone lineups with the addition of new devices providing better customer satisfaction. The company recently added a Samsung Chrono to its feature phone lineup and a Samsung Indulge to its smartphone lineup.

Of the 27 analysts covering the stock, 27% rate it a buy and 62% rate it a hold. On average, analysts surveyed by Bloomberg have a 12-month price target of $16.79, which is about 4.5% higher than the stock's recent levels.

7. AT&T ( T), a holding company, provides telecommunications services in the U.S. and worldwide. The company structures its operations into four segments: wireless (including voice and data), wire line (landline voice and data), advertising solutions (Yellow and White Pages directories) and customer information services.

During the first quarter of 2011, the company's consolidated revenue increased almost $700 million to $31.2 billion. Diluted earnings per share rose to 57 cents from 41 cents in the same quarter of the prior year. Total wireless subscribers were a record 2 million, with smartphone sales reaching more than 5.5 million. During the quarter, AT&T added 1.6 million emerging device connections to exceed the 12 million devices mark.

Convergys ( CVG) recently said it would sell its holdings in cellular partnerships located in the Cincinnati metropolitan area to AT&T in a cash transaction of approximately $320 million. AT&T expects to close the sale by early July 2011.

Moreover, the company has unveiled plans to invest $1 billion in network-based cloud, mobility and network sourcing solutions in 2011. The company will deploy the services across the board to businesses ranging from small to big multinational companies, government agencies, institutions and industries.

Of the 32 analysts covering the stock, 59% rate it a buy and the rest rate it a hold. The stock has no sell ratings. On average, analysts surveyed by Bloomberg have a $32.55 12-month price target on the stock, which is about 5.1% higher than recent levels.

6. Verizon Communications ( VZ) provides communications services in two main segments: domestic wireless and wire line. The company provides these products and services to consumers in the U.S. and over 150 other countries worldwide.

For the first quarter of 2011, the company recorded 51 cents in diluted earning per share, vs. 16 cents in the first quarter of 2010. On a consolidated basis, total operating revenue improved 0.3% to $27 billion with wireless revenue increasing 6.3% and data revenue rising 22.3%. Retail postpaid ARPU in the wireless segment increased 2.2% year over year, while retail postpaid data ARPU climbed 17.3%.

The company recently declared a quarterly dividend of 48.75 cents per share, payable on Aug. 1. Under its new agreement with Tata Communications ( TCL), Verizon announced that it would extend the range of its immersive video, or telepresence, offering to enable virtual face-to-face collaboration in more locations around the world.

Of the 35 analysts covering the stock, 40% rate it a buy and 54% rate it a hold. On average, analysts surveyed by Bloomberg have a $38.29 12-month price target on the stock, which is about 7.4% higher than recent levels.

5. Frontier Communications ( FTR), provides communications services predominantly to rural areas and small and medium-sized towns and cities. The company's services include a variety of voice, data, Internet, television services and products, some of which are available a la carte, while others are available as bundled or packaged solutions. The company offers services in data and Internet, access, directory and video segments.

Revenue reported for the first quarter of 2011 was $1.35 billion, vs. $519.9 million in the first quarter of the prior year. Meanwhile, Frontier closed the quarter with significant records, such as 83,000 new households with broadband availability and a $16 million increase in sequential cost synergies. Net income for the quarter increased to $54.7 million from $42.6 million in the year-ago quarter. Adjusted operating cash flow margin for the quarter stood at 47%.

The company recently declared its regular quarterly cash dividend of 18.75 cents per share for the second quarter of 2011, payable June 30. Looking ahead, the company plans to hold the dividend steady for the coming two years as it fully integrates the acquired wire lines. With a strong free cash flow of $252.8 million, up 66.3% year over year, the company is stable.

Of the 18 analysts covering the stock, 28% rate it a buy and 56% rate it a hold. Analysts surveyed by Bloomberg have an average 12-month price target on the stock of $8.70, which is about 9.7% higher than recent levels.

4. Windstream ( WIN), a communications and technology solutions provider, specializes in complex data, high-speed Internet access, and voice and transport services to customers in 29 states. The company provides a variety of solutions including Internet Protocol (IP)-based voice and data services, multiprotocol label switching (MPLS) networking, data center and managed services, hosting services and communications systems.

Revenue for the first quarter of 2011 was $1.02 billion, up 21% from the year-ago period. Operating income soared 14% to $282.4 million. During the quarter, the company added more than 27,000 new high-speed Internet customers in the consumer channel, while advanced data and integrated solutions rose 2.5% year-over-year in the business channel. Capital expenditure for the quarter stood at $159.6 million, increasing 164% year over year.

The company recently paid a quarterly dividend of 25 cents per share on its common stock. For 2011, the company has raised its dividend payout ratio forecast to 53%-60% from the earlier forecast of 52%-59%. For all of 2011, the company has reaffirmed its guidance and estimates revenue to range from $4.015 billion to $4.14 billion, OBIDA between $1.985 billion and $2.045 billion and adjusted OBIDA in the range of $2.045 billion to $2.105 billion.

Of the 20 analysts covering the stock, 40% rate it a buy and the rest rate it a hold. There are no sell ratings on the stock. On average, analysts surveyed by Bloomberg expect the stock to gain an average of 11.7% to $14.68 in the coming 12 months.

3. CenturyLink ( CTL) is an integrated communications services provider engaged primarily in local and long-distance voice, wholesale local network access, high-speed Internet access, and other data and video services.

During the first quarter of 2011, the company's customer base expanded by more than 52,000 high-speed Internet connections, taking the total to 2.45 million. Meanwhile, CTL narrowed its access line losses by 15.2% compared to the first quarter of 2010. Free cash flow at the end of the quarter stood at $528 million, while capital expenditure improved 26% to $210.6 million. The company recently paid a dividend of 72.5 cents per share on its common stock.

For the second quarter of 2011, including the impact of Qwest operations commencing on April 1, total revenue is forecast in the range of $4.40 billion to $4.43 billion, while diluted earnings per share are expected between 63 cents and 67 cents. For full year 2011, the company pegs operating revenue in the range of $14.9 to $15.1 billion. Diluted earnings per share are forecast between $2.55 and $2.65. Capital expenditures are estimated to range from $2.2 billion to $2.3 billion.

Of the 22 analysts covering the stock, 64% rate it a buy, whereas 32% rate it a hold. Analysts polled by Bloomberg expect the stock to gain an average of 15.9%, to $45.89, over the next 12 months.

2. Virgin Media ( VMED), engages in providing entertainment and communications services and operates in two main segments: consumer and business. The company provides broadband Internet, television, mobile telephony and fixed-line telephony services that offer a variety of entertainment and communications services to residential and commercial customers across the U.K.

For the first quarter of 2011, the company recorded revenue growth of 5.7% to $1,591.5 million, while operating income increased 58.9% to $179.9 million. During the quarter, free cash flow more than doubled to $162.1 million. Cable ARPU increased 2.6%, while mobile ARPU was up 7.3%.

Westminster and Virgin Media recently signed a pan-London IT framework deal valued at $307.9 million in order to introduce a new PSN-compliant next-generation network resource, which could operate as a one-stop solution for London's public sector when it comes to purchasing video, data, phone, Wi Fi and CCTV services. Using this service, public-sector organizations in London would be able to save almost $810,341.40 over the next five years.

The company recently revealed that its ultrafast 100 Mb broadband rollout has reached a landmark four million homes, providing families in the U.K. a service that delivers over 16 times the average national broadband speed. The rollout for the remaining network of 13 million homes is on track and is expected to be completed by mid-2012.

Of the 24 analysts covering the stock, 67% rate it a buy and 25% rate it a hold. Analysts polled by Bloomberg expect the stock to gain an average 20.1% to $35.74 in the coming 12 months.

1. tw telecom ( TWTC), is a provider of managed network services, specializing in data, Internet protocol (IP), voice and network access services to enterprises including public sector entities and carriers across the U.S. The company serves the U.S. metropolitan markets with its fiber facilities, which are connected by its regional fiber facilities and national IP backbone.

Total revenue for the first quarter of 2011 increased 6.9% year over year to $332.5 million, buoyed by strong enterprise revenue growth. The company swung to a net income of $12.6 million from a net loss of $4.5 million in the year-ago period.

U.S.-based Bowman Consulting Group has selected tw telecom to provide advanced data and Internet services to supply networking services to its 14 offices in four states. The services include Ethernet internet and IP VPN (MPLS) services, as part of a multiyear agreement. The services will connect Bowman's remote offices to headquarters.

Attributing its 26 consecutive quarters of revenue growth to its strategy of continuous investment in people and software, TWTC comments that it plans to hike investment further to enhance profitability. The company is seeking to invest in a new kind of intelligent network that is application-aware and enables services. Further, it plans to invest in end-to-end application management.

Of the 16 analysts covering the stock, 38% rate this stock a buy, and the rest rate it a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg expect the stock to gain an average of 20.4% to $24.17 in the coming 12 months.

>>To see these stocks in action, visit the 8 Telecom Stocks That Could Rise portfolio on Stockpickr.

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