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11/2/2001 12:00:00 PM
NEW YORK, Nov 2 (Reuters) - Salomon Smith Barney said on Friday telecommunications analyst Jack Grubman downgraded three small telecommunications company to ``neutral'' from ``buy.''
The downgraded stocks were XO Communications Inc. (XOXO) , Williams Communications Group Inc. (WCG) and McLeodUSA Inc. (MCLD)
Grubman cut XO ahead of its third-quarter earnings results since he said there was a risk that the company would fail to meet the firm's forecast due to the Sept. 11 attacks and weak economy.
Also, Grubman said there was a possibility of technical pressure on the stock since XO will likely be removed from the Nasdaq 100 index, and may see selling as investors clean up their portfolios for year-end tax losses.
``Importantly, the bank debt and the bonds trade at distressed levels implying debt investors believe that XO's equity is of little value & XO will be compelled to issue equity to debt holders, diluting existing equity holders,'' Grubman said in a research report.
Grubman said he expects XO's revenues will be below the level required by its debt covenants in the third quarter of 2002.
On Williams Communications, Grubman said he downgraded the stock because there was limited visibility on the company's carrier business, and no near-term catalyst that would boost the stock price. Also, Grubman said he expects Williams will reach free cash-flow positive after the company's goal of 2003.
On McLeodUSA, Grubman said he downgraded the stock ahead of the company's third-quarter results next week. He said he expects McLeodUSA's revenues to be down from the second quarter, ``meaning it will no longer be considered a 'growth' stock and with free cash flow not expected until 2006, it is still far from a 'value' stock label so investor interest is expected to be low.''
Shares of XO lost 2 cents, or 2.17 percent, to 9 cents a share. Williams shed 11 cents, or 7.05 percent, to $1.45, while McLeodUSA lost 3 cents, or 4.23 percent, to 68 cents in morning trading.
REUTERS
Rtr 12:00 11-02-01
11/2/2001 12:00:00 PM
NEW YORK, Nov 2 (Reuters) - Salomon Smith Barney said on Friday telecommunications analyst Jack Grubman downgraded three small telecommunications company to ``neutral'' from ``buy.''
The downgraded stocks were XO Communications Inc. (XOXO) , Williams Communications Group Inc. (WCG) and McLeodUSA Inc. (MCLD)
Grubman cut XO ahead of its third-quarter earnings results since he said there was a risk that the company would fail to meet the firm's forecast due to the Sept. 11 attacks and weak economy.
Also, Grubman said there was a possibility of technical pressure on the stock since XO will likely be removed from the Nasdaq 100 index, and may see selling as investors clean up their portfolios for year-end tax losses.
``Importantly, the bank debt and the bonds trade at distressed levels implying debt investors believe that XO's equity is of little value & XO will be compelled to issue equity to debt holders, diluting existing equity holders,'' Grubman said in a research report.
Grubman said he expects XO's revenues will be below the level required by its debt covenants in the third quarter of 2002.
On Williams Communications, Grubman said he downgraded the stock because there was limited visibility on the company's carrier business, and no near-term catalyst that would boost the stock price. Also, Grubman said he expects Williams will reach free cash-flow positive after the company's goal of 2003.
On McLeodUSA, Grubman said he downgraded the stock ahead of the company's third-quarter results next week. He said he expects McLeodUSA's revenues to be down from the second quarter, ``meaning it will no longer be considered a 'growth' stock and with free cash flow not expected until 2006, it is still far from a 'value' stock label so investor interest is expected to be low.''
Shares of XO lost 2 cents, or 2.17 percent, to 9 cents a share. Williams shed 11 cents, or 7.05 percent, to $1.45, while McLeodUSA lost 3 cents, or 4.23 percent, to 68 cents in morning trading.
REUTERS
Rtr 12:00 11-02-01