UPDATE: Goldman Sachs Downgrades Frontier Communications to Sell; Synergies to Fall Off in 2013

Goldman Sachs reduced its rating on Frontier Communications

from Neutral to Sell and lowered its price target from $4.50 to $3.75. Goldman Sachs commented, "We downgrade shares of FTR to Sell with a 12-month PT of $3.75, representing 14% downside to current levels. FTR's cost structure has deteriorated in 2011-2012, with synergies preventing meaningful margin degradation. However, we estimate incremental synergies to fall 90% in 2013, pressuring the company to deliver on organic cost cutting targets. In addition, a more aggressive posture towards broadband share should serve as a cost headwind. Though we see little near-term risk to the dividend, EBITDA declines limit the ability to delever the balance sheet. We forecast FCF/share declines of 15-17% in 2013/2014." Frontier Communications closed at $4.35 on Thursday.