We downgrade our recommendation for CenturyTel (CTL), a leading rural telecom carrier, to Underperform based on management’s tepid outlook. Earnings for the last quarter beat the Zacks Consensus Estimate driven by the contributions from the Embarq Corp acquired in July 2009.
Although CenturyTel continues to grow its broadband customer base and associated revenue, the company remains significantly challenged by the declines across voice and network access operations. Moreover, the carrier has provided a pessimistic outlook for 2010.
Operating results are expected to be restricted by sustained erosion in access lines coupled with lower access revenue. We also remain concerned about the integrated company’s high debt level.Zacks Investment Research
