) to neutral from overweight.
The telecommunications company posted 66 cents fourth quarter earnings per share on an 8.6% revenue decline, but expects annual revenues to decline less this year than in 2002.
Analyst Mark Crossman says his downgrade is based on a poor outlook for 2003; he says AT&T's market share gains will not be able to offset declines in fundamentals and the lack of an economic recovery. Crossman notes the company's 2003 guidance fell short of his expectations, implying little improvement in top-line trends vs. 2002, and continued EBIT margin deterioration of about 4% to 5%.
He cut the 2003 earnings per share estimate to $1.88, and cut the revenue estimate to 8%. He thinks $18 to $19 per share is a fair value for the stock, which implies a price-earnings multiple of 10 times the new 2003 earnings per share estimate. Despite the sharp sell-off Thursday morning, Crossman says he would still look for a lower entry point.