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Davenport downgraded Qwest Communications (Q
) to underperform from hold.
Analyst Drake Johnstone says he's concerned given Qwest's poor performance that the company is not going to hit its objective of being free cash flow positive in the first half of 2002. He notes that despite Qwest's capital expenditure cuts, capital expenditures are running at $1.375 billion per quarter based on Q3's levels, yielding a $400 million free cash flow loss. Given the unpredictability of results and apparent deterioration, Johnstone is concerned Qwest is going to generate negative free cash flow through the end of 2002 unless it slashes capital expenditures further.