Merrill downgraded Qwest Communications (Q ) to near-term neutral from buy, and long-term accumulate from buy.
Analyst Adam Quinton says he had a $0.02 Q3 EPS estimate. He says Q3 foretells much a weaker revenue outlook and says the company is struggling to deliver net income growth, which now is down for three consecutive quarters. He notes the company's dividend payout is much less than peers, at around a 0.3% yield vs. 2%-3% for pure play regional bell operating companies (RBOC). He says Qwest's long distance entry appears to have been delayed somewhat. Finally, Quinton says Qwest appears to trade at a premium EV/EBITDA multiple to pure play RBOCs, but lacks dividend support.