) to hold from buy.
Analyst John Hodulik says WorldCom still faces weak demand for data services and a challenging operating environment. He sees increasing pressure on management to restructure its MCI tracking stock. Given the slower growth at WorldCom group, MCI will be increasingly asked to shoulder a larger percentage of the allocated cost, preventing it from meeting its financial obligations. Hodulik thinks cost cutting will become the mantra of the WorldCom group. He cut his $0.72 2002 earnings per share estimate to $0.65, and trimmed the $0.74 2003 estimate to $0.67.
Hodulik says the current 30% premium over AT&T's multiple is no longer justified, adding that parity with AT&T's valuation would be WorldCom trading at $3.50 per share, assuming no equity value for MCI.