Morgan Stanley Cuts Frontier Airlines to Equal-Weight

Analyst William Greene cites overcapacity, high fuel prices, and substantial pricing pressure

Morgan Stanley downgraded Frontier Airlines (FRNT ) to equal-weight from overweight.

Analyst William Greene says overcapacity, high fuel prices, and substantial pricing pressure suggest that despite a sharp pull-back in airline stocks over past few months, there are few near-term catalysts for the group. Specifically, he downgraded Frontier over concerns of weak revenue and too-high expectations.

Greene believes revenue trends in top Frontier markets have disappointed over the past four to six weeks. He cut the 53 cents fiscal 2005 (Mar.) earnings per share forecast to 40 cents (well below the consensus of 74 cents), which reflects more conservative yield assumptions, and $34-a-barrel oil prices. He sees 75 cents fiscal 2006 EPS.