From Standard & Poor's Equity ResearchCREDIT SUISSE UPGRADES CONSOLIDATED COMMUNICATIONS AND CITIZENS COMMUNICATIONS TO OUTPERFORM FROM NEUTRAL
Credit Suisse analyst Christopher Larsen says he believes Consolidated Communications Holdings (CNSL) and Citizens Communications (CZN) are potential takeover candidates; industry consolidation could ramp due to expiration of lock-up restrictions for larger rural local exchange carriers (RLECs).
Larsen notes when both Windstream (WIN) and Embarq (EQ) were formed via tax-free spin-offs, they were restricted in the amount of shares they could issue; EQ's restrictions recently ended, WIN's will end July 18. He believes both potential RLECs are consolidators.
He also thinks the pullback in CNSL stock provides an attractive entry point for investors. He sees limited downside at these levels: due to RLECs' high yields, they tend to trade more like bonds. He has a 12.50 target price for CZN, and 16 for CNSL.
RBC CAPITAL UPGRADES LCA-VISION TO SECTOR PERFORM FROM UNDERPERFORM
RBC Capital analyst Kevin Ellich says LCA-Vision (LCAV) shares are down nearly 59% year-to-date. He says he doesn't see much downside from current levels and thinks shares could trade sideways.
Ellich believes lower expectations and recently announced expense reductions might help. He notes the company reduced headcount and marketing expenditures; it should also consider closing some underperforming centers or move away from multiple laser offerings.
He says, as price targets roll-forward to 2009 estimates, he believes LCAV's valuation will start to look more rational, although he does not have a good handle on 2008 earnings and visibility is low. He keeps his 8 price target.