Bear Stearns maintains its neutral rating on shares of Qwest (Q) following the company's filing of its Form 10-K with the Securities and Exchange Commission.
Analyst Robert Fagin says that while many of the 10-K disclosures are psychological negatives (such as SEC inquiries and EPS adjustments), they will have a minimal financial impact. However, two important disclosures emerged: the company is taking a $20-$30 billion second quarter goodwill writedown, and announced a delay in its long distance market re-entry to fall/winter. Fagin notes that the writedown will increase Qwest's debt-to-capital ratio to between 60%-79% from 40%, while EPS would be impacted by $12-$18 per share. As a result of its delay into long distance, the analyst expects that the company will not generate material long distance revenue in 2002, as was already reflected in his model; further delays could put 2003 revenue at risk, according to Fagin.