Raymond James Cuts Cincinnati Bell to 'Market Perform'

Analyst Frank Louthan says lower than expected earnings estimates for 2004 have had a negative impact on his free cash-flow estimates

Raymond James downgraded Cincinnati Bell (CBB ) to market perform.

Cincinnati Bell posted $3.17 fourth-quarter earnings per share, including a tax benefit. The company provides local and wireless telephone service in the Midwest. Analyst Frank Louthan says he downgraded from strong buy due to lower than expected earnings estimates for 2004, which have had a negative impact on his free cash-flow estimates. He says Cincinnati Bell issued fairly detailed guidance, which implies that his EBITDA and free cash-flow estimates for 2004 are high. Louthan cut the $557 million 2004 EBITDA estimate to $499 million, and cut the 84 cents free cash-flow estimate to 49 cents. He trimmed the 59 cents earnings per share estimate to 54 cents.

Louthan says a big reason why he cut the 2004 earnings per share estimates was higher expectations for additional subscribers, which is likely to pressure wireless margins. He also thinks incumbent local exchange carrier estimates, and a less significant contribution from the company's remaining consulting business, is likely to pressure results.

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