UBS Ups Convergys to Buy from Neutral
UBS Financial upgraded the software services company Convergys (CVG) to buy from neutral, citing possible events in the near term that could boost the stock price.
Analyst Jason Kupferberg says that employee care segment disclosures in the company's upcoming 10-K (expected early March) could be a positive near-term catalyst for Convergys stock. The shares have proved resilient despite recent negative news flow, and the company's 8.6% free cash flow yield limits near-term downside. Congergys might be a take-out candidate, he speculates further, adding that the worst of customer consolidation risk is likely past. Meanwhile Convergys' proven cost-cutting execution sets the stage for 2006 earnings per share (EPS) upside, the analyst says. He raises his $17 target to $20 and sees $1.09 2006 EPS, as well as $1.13 in 2007.