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CS First Boston Cuts Nortel Outlook

CS First Boston cut estimates on Nortel (NT).

Analyst James Parmalee says he cut estimates due to ongoing weakness in the telecommunications equipment sector and the lack of visibility on end-demand improvement. He notes that Moody's downgraded Nortel's senior unsecured paper to a notch above junk status. He thinks the company will likely be in conformance with bank line debt covenants through the first quarter, but believes there's a meaningful risk to compliance in subsequent quarters.

Parmalee says the recovery rate of the sector will likely be extremely gradual. He cautions investors to assume a 12-18 month time horizon. He widened his $0.24 2002 loss estimate to a $0.31 loss, and cut the $0.20 2003 earnings per share (EPS) estimate to $0.15 EPS. Parmalee has a $10 12-18 month target. He rates Nortel as a buy.

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