UPDATE: D.A. Davidson & Co. Reiterates Underperform Rating, Lowers PT on CenturyLink Ahead of Expected Tough Quarter & Further Downside

In a report published Monday, D.A. Davidson & Co. analyst Donna Jaegers reiterated an Underperform rating on

, but lowered the price target from $30.00 to $28.00. In the report, D.A. Davidson & Co. noted, “CTL will announce its Q3 results after the close on November 6th and host an earnings call at 5 pm ET. We expect earnings to be at the lower end of guidance due to higher outside plant maintenance costs as a result of seasonality (more maintenance in summer months) and overtime from the recent flooding in Colorado. CTL has slowed its access line loss from 6.4% in early 2012 to a 5.8% annual pace in Q2'13 by ‘encouraging' new DSL subscribers with a cheaper $19.95 per month rate if they take a voice line as well. However, its DSL subscriber growth has stalled recently with the loss of 6,000 subs in Q2, and we think the problems are more than temporary. With only 7.4 million households, or 35% of a total footprint of 20-22 million households covered by fiber to the node, CTL has a lower speed product than its cable competitors, and we think CTL will have to raise capex in 2014 to accelerate fiber to the node. Also, we think CTL is considering a wider roll-out of its Prism TV IPTV offering, which will entail more capex and will add to costs in 2014 and beyond, depressing EBITDA margins. We think CTL is finally coming to grips with how much Qwest under-invested in its local plant, and will bite the bullet in 2014 in order to try to stabilize consumer and small business revenues.” CenturyLink closed on Friday at $33.01.