UPDATE: Deutsche Bank Reiterates on Frontier Communications Following News of Acquisition of AT&T Wireline Assets

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In a report published Wednesday, Deutsche Bank analyst Greg Poole reiterated a Hold rating on
Frontier CommunicationsFTR
, and raised the price target from $4.50 to $4.70. In the report, Deutsche Bank noted, “Maintaining Hold and raising PT to $4.70. FTR's deal to acquire AT&T's wireline assets in CT for $2.0B, all in cash, implies a pre/post-synergy EV/EBITDA multiple of 4.8x/3.7x, according to yesterday's announcement, vs. a '14E trading multiple of 5.8x pre-announcement. The deal increases FTR's revenues by 27% and results a ‘15E adj FCF payout ratio of 47% based on our new ests. FTR expects the deal to close in 2H14 and will fund it with a mid-14 debt raise of $1.9B (est ~7.4% coupon). We believe FTR's 8.6% dividend yield reflects NT operating pressures and questions about LT dividend sustainability. Our Hold rating balances the attractive yield against the risks of intensifying competition and uncertainties related to cash taxes.” Frontier Communications closed on Tuesday at $4.78.
Posted In: Analyst ColorPrice TargetAnalyst RatingsDeutsche BankGreg Poole
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