Frontier Communications (FTR) Stock Gets Rating Upgrade at Morgan Stanley

NEW YORK (TheStreet) --Frontier Communications Corp. (FTR) was upgraded to "overweight" from "underweight" at Morgan Stanley on Wednesday morning.

Shares of the communications company are higher by 4.67% to $5.15 in mid-morning trading.

The firm said it raised its rating on Frontier Communications based on a valuation call and the company's attractive dividend yield.

Morgan Stanley has a $6 price target on Frontier Communications, down from its previous $7 price target.

The rating upgrade came after the company's 26% sell-off in the year to date due to the pending financing for the Verizon (VZ) wireline assets, theflyonthewall.com reports.

Frontier Communications is a Stamford, CT-based telecommunications company engaged in providing services mostly to rural areas and small to medium sized towns and cities in the U.S. The company's offerings include a variety of voice, data, and TV services and products.

Separately, TheStreet Ratings team rates FRONTIER COMMUNICATIONS CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate FRONTIER COMMUNICATIONS CORP (FTR) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.5%. Since the same quarter one year prior, revenues rose by 18.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 40.92% 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, FTR's net profit margin of -3.71% significantly underperformed when compared to the industry average.
  • FRONTIER COMMUNICATIONS CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past two years indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than the prior full year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP increased its bottom line by earning $0.13 versus $0.12 in the prior year. This year, the market expects earnings to be in line with last year ($0.13 versus $0.13).
  • Net operating cash flow has decreased to $249.00 million or 20.41% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • In its most recent trading session, FTR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • You can view the full analysis from the report here: FTR Ratings Report

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