Lehman downgrades CenturyTel (CTL ) to underweight from equal-weight.
Yesterday, the company posted 62 cents fourth-quarter GAAP earnings per share. Analyst Thomas Seitz says given sluggish growth outlook of the Rural Local Exchange carrier (RLEC) sector, he favors material dividend payments as the best way to achieve meaningful total return.
He does not believe CenturyTel shares will appreciate materially in the near-term, but downside support will be provided by the company's current 9% 2005 free-cash-flow yield. He notes fourth-quarter results and 2005 guidance are all at the lower end of his expectations.
Seitz cuts his $38 target to $35. Based on weak growth outlook, only 4% to 5% share price appreciation potential and very little dividend yield, he downgrades.