Qwest: Weisel Upgrades In Quest For Yield

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Thomas Weisel Partners analyst James Breen this afternoon lifted his rating on Qwest (Q) to Market Weight from Underweight, following a recent pullback in the shares. Breen notes that the stock is down 9% since it reported Q2 earning in late July, a period in which the S&P 500 rallied 6%.

“Given the company’s solid dividend yield and stable wireline fundamentals, we believe shares will now perform in line with its peer group,” he writes. Breen raised his target on the stock to $4, from $3.75.

Breen notes that the stock now has a yield of 8.86%, the fourth highest in the S&P 500. The only higher yields in the index belong to Frontier Communications (FTR), at 14.3%, Windstream (WIN), at 11.6%, and CenturyTel (CTL), at 8.9%.

Meanwhile, he notes that Q2 capex was down 35% year over year, as the company’s fiber-to-the-node plan remained on track. Strong free cash flow has beefed up the balance sheet, he says, and allowed the company to affirm the current dividend level and indicate plans to buy back shares.

Q today rose 18 cents, or 5.3%, to $3.61.