For Immediate Release
Chicago, IL – February 17, 2010 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Qwest Communications (Q), Alcatel-Lucent (ALU), AT&T (T), Verizon (VZ) and Everest Re Group (RE).
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Here are highlights from Tuesday’s Analyst Blog:
Qwest Meets but Profit Tanks
Qwest Communications (Q) has announced fourth-quarter 2009 earnings with adjusted (excluding severance charges) earnings per share (EPS) of 8 cents, matching the Zacks Consensus Estimate while falling from the year-ago quarter adjusted EPS of 11 cents. For full year 2009, EPS of 38 cents missed the Zacks Consensus Estimate of 40 cents.
Reported net income plunged 39% year-over-year to $108 million or 6 cents a share due to higher non-cash pension expenses, increased severance costs (associated with job cuts) and lower revenues as erosion in legacy landline business continues due to wireless substitution.
Opportunities & Challenges
Qwest continues to invest in building necessary infrastructure to boost network capacity and availability. Historically, the company has allocated a major portion of the overall CapEx in deploying additional fiber-to-the-node (“FTTN”) capacity to increase the performance of its broadband network. Moving forward, Qwest plans to increase spending on deployment of fiber optic cable to support wireless services.
Through a joint venture with Alcatel-Lucent (ALU), Qwest is upgrading its fiber-based network infrastructure to offer top Internet speeds of 100 gigabits per second (Gbps), a significant increase from the current peak speeds of 40Gbps. Leveraging its FTTN network, the company introduced a new fiber-based Ethernet backhaul wholesale service for wireless operators in 2009.
This new service enables wireless operators to upgrade their existing copper-based wireless backhaul networks to faster fiber optic connections, which will expand capacity to meet the requirements for bandwidth-intensive multimedia devices and facilitate smooth transition to fourth-generation (4G) wireless networking.
However, Qwest remains more challenged than other regional telephone companies in the US such as AT&T (T) and Verizon (VZ) given the lack of its own wireless and satellite TV services. This has prevented Qwest from achieving meaningful penetration in these lucrative markets.
Moving forward, we expect the company’s business prospects to be driven by continued strong demand for its broadband Internet service, expansion of fiber-based network capabilities and the wireless backhaul opportunity. However, access line losses due to competition will continue to erode operating revenue in the upcoming reporting periods. This is reflected in our Neutral recommendation on the stock.
Everest Re Misses Zacks View
Everest Re Group’s (RE) fourth quarter earnings of $3.19 per share missed the Zacks Consensus Estimate of $3.38. The miss was primarily due to an increase in claims expenses.
However, the results were better compared to the prior-year quarter when the company had reported earnings of $2.92 per share. The increase was primarily driven by higher revenues and a mild catastrophe season.
Including realized capital gains and losses, Everest reported net income of $197.2 million or $3.28 per share, compared to a net loss of $16.6 million or 27 cents per share in the year-ago period. Results in the prior-year quarter had been hurt by higher capital losses.
For the full year 2009, Everest reported operating earnings of $12.51 per share, up from $9.10 per share reported a year earlier. Including realized capital gains and losses and the gain on the first quarter’s debt repurchase, the company reported net income of $807.0 million or $13.22 per share, compared to a net loss of $18.8 million or 30 cents per share for 2008.
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