UBS Financial upgraded the software services company Convergys (CVG
) to buy from neutral, citing possible events in the near term that could boost the stock price.
Analyst Jason Kupferberg says that employee care segment disclosures in the company's upcoming 10-K (expected early March) could be a positive near-term catalyst for Convergys stock. The shares have proved resilient despite recent negative news flow, and the company's 8.6% free cash flow yield limits near-term downside. Congergys might be a take-out candidate, he speculates further, adding that the worst of customer consolidation risk is likely past. Meanwhile Convergys' proven cost-cutting execution sets the stage for 2006 earnings per share (EPS) upside, the analyst says. He raises his $17 target to $20 and sees $1.09 2006 EPS, as well as $1.13 in 2007.