UBS Cuts Qwest Rating On Broadband Slowdown

Qwest(Q) shares were lower Wednesday after UBS telecom analyst John Hodulik cut his rating on the stock to Neutral from Buy. He trimmed his price target on the stock to $10 from $11.

“We have been bullish on Qwest shares given its attractive free cash flow yield along with the potential for increasing return of cash to shareholders,” he wrote in a note. “While we continue to expect a dividend announcement shortly, we believe risk to the company’s strong cash flows are increasing.”

Hodulik is concerned about both slowing growth in broadband and “increasing pressure on the consumer.” He adds that trouble finding topline growth could spur the company to pursue an optical fiber-based IPTV strategy in 2008, something Qwest has resisted so far in part due to the high costs of building out a system.

Hodulik cut this 2007 EPS estimate to 58 cents from 62 cents; for ‘08 he goes to 43 cents from 47 cents.