We downgrade our recommendation for Liberty Global Inc. (LBTYA) to Underperform based on its current valuation, which has moved up by nearly 88% in the last year. The stock is currently trading at a significantly higher multiple with respect to several valuation metrics, compared with the S&P 500 average and the industry average.
The fourth quarter 2010 net earnings of Liberty Global fell below the Zacks Consensus Estimate although revenue beat by a slender edge. Significant increases in operating costs and higher interest expenses are the primary reasons for the erosion of the bottom-line.
We remain concerned about the company’s Central & Eastern European operations. In the reported quarter, Liberty Global lost 37,000 video customers, mostly in these regions. Additionally, the company has a highly leveraged balance sheet that may result further increase interest expense going forward. We do not find any immediate catalyst for Liberty Global.
LIBERTY GLBL-A (LBTYA): Free Stock Analysis Report
Zacks Investment Research
