UPDATE: Jefferies Initiates Coverage on Consolidated Communications Holdings with Buy Rating, $20 PT on SureWest Transaction

In a report published Wednesday, Jefferies analyst Thomas Seitz initiated coverage on Consolidated Communications Holdings CNSL with a Buy rating and $20.00 price target. In the report, Seitz noted, “Consolidated's RLEC footprint covers parts of IL, western-PA, TX, and CA; its CLEC business, which primarily targets mid-sized businesses, educational and healthcare institutions, covers Pittsburgh and Butler in PA; it is also a cable over-builder in parts of Kansas City. Additionally, it is a minority partner with Verizon Wireless in five ventures covering certain markets in TX and PA which offer attractive cash distribution, allow participation in wireless growth, and provide a hedge against wireless substitution. Pro forma for the SureWest acquisition, CNSL boasts a growing topline driven by business and broadband, which now account for 70% of revenues. In our view, in addition to growth, cost savings, and $70M in NOLs to offset cash taxes, the SureWest transaction diversifies risk, especially from declining regulatory revenues.” Consolidated Communications Holdings closed on Tuesday at $17.64.