Sprint PCS downgraded to "hold"

03/02/04 - Kaufman Brothers

NEW YORK, March 2 (New Ratings) — Analyst Rick Grubbs of Kaufman Brothers downgrades the Sprint PCS Group (PCS) from “buy” to “hold.” The target price is set to $10.

Shares of Sprint PCS, a US-based communications services company, are currently trading at $9.51.

According to Kaufman Brothers’ research note published this morning, Sprint has announced the approval of its Board of Directors for a corporate capital restructuring program which would combine the company’s two tracking stocks. The analyst mentions that Sprint’s two tracking stocks, FON and PCS, are likely to be merged into a single asset-based stock, FON, by April this year. Kaufman Brothers estimates the total value of this deal, comprising of 0.5 shares of FON for each share of PCS, at $26.3 billion.

Sprint PCS anticipates net pretax expenses worth about $55 million in 2004 and an additional $45 million in 2005 due to its proposed stock option conversion program, the analyst says. Kaufman Brothers expects the company’s gross margins to increase to 54% in 2004, as compared to 51% last year.

The current valuation of Sprint PCS’ stock reflects its near-term earnings growth potential, the analyst believes.

Kaufman Brothers downgrades the Sprint PCS Group from “buy” to “hold.”