Weekly wireless ratings wrap-up

Following are changes in wireless company ratings reported by financial services and investment banking firms this week.

• Standard & Poor’s Ratings Services said Sprint Corp. and Nextel Communications Inc. remain on CreditWatch with positive implications based on operating and financial improvement.

   

• Raymond James downgraded Crown Castle International Corp. to outperform from strong buy on valuation and lowered its price target to $25.

   

• Standard & Poor’s Ratings Services upgraded its ratings on Western Wireless L.L.C., the successor by merger to Western Wireless Corp., including the long-term corporate credit rating, which was raised from B- to A. The ratings were removed from CreditWatch where they were placed with positive implications in January when plans were announced for Alltel Corp. and Western Wireless to merge. “We withdrew the rating on Western Wireless’ $1.5 billion of secured bank facilities, because borrowings under this facility have been repaid by Alltel,” said Standard & Poor’s credit analyst Catherine Cosentino. “At the same time, we affirmed the existing ratings on Alltel, including the A corporate credit rating, and assigned our A rating to Alltel’s $700 million unsecured revolving credit maturing in 2006.” The outlook is negative.

   

• CIBC downgraded Alvarion Inc. from sector performer to sector underperfomer and lowered its 2005 revenue and earnings per share estimates on the company to $197.7 million and a loss of 8 cents from $216 million and a return of 4 cents. For 2006, revenue and EPS estimates were reduced to $214.1 million and 5 cents from $263.8 million and 24 cents. Alvarion recently reported financial results in line with CIBC’s estimates. However, CIBC noted order delays, weakness in TDM product orders and postponement of frequency allocations as reason for the downgrade.

   

• Prudential Equity Group adjusted its estimates on Alltel Corp. following the completion of the company’s acquisition of Western Wireless Corp. Full-year 2005 earnings per share estimates move to $3.29 from $3.43, and 2006 EPS moves to $3.65 from $3.90. Alltel is rated neutral by Prudential.

   

• Prudential Equity Group lowered its estimates on Analog Devices Inc. based on revenue declines and lowered guidance. Prudential estimates Analog Devices will generate EPS in 2005 of $1.26 rather than $1.33 and EPS in 2006 of $1.67 rather than $1.78. The firm also assigned a new $37 price target to the company, down from $39.

   

• J.P. Morgan initiated coverage on Leap Wireless International Inc. with an overweight rating.

   

• Prudential Equity Group slightly adjusted its estimates on Qwest Communications International Inc. after the company reported in-line to slightly better-than-expected second-quarter financial results. Prudential noted Qwest gained wireless customers for the first time since 2002 and improved average revenue per user. The firm raised its 2005 EPS estimate from a loss of 30 cents per share to a loss of 29 cents per share. Prudential rates Qwest at neutral.

   

• J.P. Morgan upgraded Powerwave Technologies Inc. from neutral to buy, citing three reasons. First, the company said industry consolidation will lead to pricing power, allowing gross margins to stay above the 25-percent level. Second, the company’s acquisition of Remec should provide more operational leverage. And third, third-generation-related Capex activity should sustain modest but diversified top-line growth this year.

   

• Robert W. Baird raised its 2005 and 2006 forecasts on Nextel Partners Inc., reflecting the company’s stronger-than-expected second-quarter results and higher guidance. RW Baird raised its 2005 service revenue and EBITDA forecasts to $1.65 billion and $555.5 million respectively, compared with previous forecasts of $1.64 billion and $546.4 million. It lowered its full-year 2005 earnings-per-share forecast from 81 cents to 70 cents based on tax impacts. It raised its 2006 EPS forecast from 87 cents to 84 cents. Nextel is rated outperform by RW Baird.

   

• Robert W. Baird raised its price target on Powerwave Technologies Inc. from $10 to $15 and maintained its outperform rating on the company as a result of results and guidance that were above expectations. The firm noted increased demand from Cingular Wireless L.L.C. and L.M. Ericsson. RW Baird raised its 2005 revenue and EPS estimates to $747 million and 50 cents per share, from $707 and 47 cents per share.

   

• Merrill Lynch downgraded the wireless sector to equal weight and the software sector to underweight and upgraded its storage and communications equipment sector to overweight and the services segment to equal weight. In another note, Merrill Lynch raised its net addition estimates for 2005 from 22 million to 23 million, due mainly to Verizon Wireless’ better-than-expected growth. Analysts noted that growth is being driven by partly by family plans and incremental youth segment.

   

• Piper Jaffray adjusted its 2005 estimates on @Road due to faster-than-expected revenue growth offset by lower-than-expected operating margins. The firm now predicts earnings per share and revenue of 2 cents and $83 million for 2005, compared with a loss of 8 cents per share and revenues of $93 million previously predicted. For 2006, Piper Jaffray expects earnings of 13 cents per share on revenues of $92 million vs. previous estimates of 16 cents per share and revenues of $112 million.

   

• Bank of America downgraded Motorola Inc. based on valuation. The firm said Motorola’s current valuation now reflects a strong handset market, great new products, share gains and non-handset margin increases. However, a step-up in handset margins will be required to raise shares above its $22 price target, said Bank of America.

   

• Morgan Stanley raised its price target on American Tower Corp. from $20 to $24. The company exceeded expectations and wireless industry trends, pointing to an even move favorable outlook for tower operators, said the firm. Morgan Stanley rates American tower overweight. Morgan Stanley also increased its price target on SpectraSite Holdings to $86 from $65, also based on better-than-expected financial results and positive wireless trends. SpectraSite is also rated overweight by Morgan Stanley.

   

• Avondale Partners upgraded Pctel Inc. from market underperform to market perform on stronger-than-expected sales and increased 2005 revenue guidance. Avondale also raised its price target to $9.50 from $7 and its 2005 earnings per share from a loss of 37 cents per share to a loss of 23 cents per share.

   

• Prudential maintained its neutral rating on RadioShack Corp. following news the retailer had signed contracts with Sprint Corp. and Cingular Wireless L.L.C. and will no longer carry Verizon Wireless service. Prudential said the loss of Verizon presents a modest negative to the company, but improved economic terms, new technologies and expanded opportunities outweigh the downside of the deals. Prudential also noted the news could be negative for Verizon, which attributed a mid-single digit percentage of its gross adds to RadioShack. However, the news is in line with Verizon’s efforts to bring more sales in house, said Prudential.