Merrill Lynch downgraded AT&T (T) to sell from neutral.
Analyst Adam Quinton says AT&T's enterprise recovery continues to be delayed, and consumer-competitive intensity is increasing as regional bells pursue bundles and cut prices. He says it's increasingly likely that MCI will emerge from Chapter 11 before the end of the year, potentially increasing the competitive intensity in the long-distance telephone space.
Quinton says AT&T's valuation is hard to pin down as he thinks revenue and earnings per share will decline for the next several years. He recommends investors looking for yield in the telecom space switch to Verizon, his preferred big-cap telecom, which has a 3.9% yield, vs. AT&T's 3.6% yield.
Quinton sees $2.21 2003 earnings per share for AT&T, and $1.70 earnings per share for 2004 (GAAP).