Morgan Stanley Overweight On CenturyLink, Inc. (CTL)

Morgan Stanley has an Overweight rating and a $50 price target on shares of CenturyLink, Inc. CTL. In a note to clients, Morgan Stanley writes, "We believe the share price will rise in absolute terms over the next 60 days. This is because the stock has traded off recently, making short term valuation much more compelling. On Feb 15 CenturyLink provided a conservative standalone guidance for 1Q11 and 2011; the stock has fallen 9.9% since then. We note that this is was only the second time in the last 20 quarters that EPS failed to beat consensus estimates. Moreover, CenturyLink has beaten the midpoint of its initial annual guidance by ~34 cents since 2006. We expect updated guidance including Qwest (the deal is expected to close next Friday, April 1st) when CenturyLink reports 1Q11 results on May 4th. In addition to having the third highest dividend yield (7.1%) in the S&P 500 (with best-in class coverage of ~45% pf for synergies) we like CenturyLink because of its deal synergies, cost cutting, improved revenue trends, and strong B/S. We estimate that there is about a 70% to 80% or "very likely" probability for the scenario. Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the scenario." Shares of CTL are up 40 cents in early trading to $41.09, a gain of less than 1%.