From Standard & Poor's Equity Research
TNS Inc. (TNS) says it has ended its strategic review, concluding that it is not in best interests of the company and stockholders to pursue third party proposal to acquire the company for $20 per share. JP Morgan downgraded the stock to underweight from neutral.
Analyst Tien-tsin Huang says the downgrade comes as the TNS board ends its review of alternatives. The analyst says new revenue guidance puts him at the low end, while lower gross margin likely explains the earnings difference. He believes TNS faces some near-term challenges, including: long international sales cycles where the pipeline is strongest; secular decline in domestic POS dial business; consolidating end market that could pressure pricing.
Huang views the shares as dead money as investors digest the disappointing end of strategic view along with slashed guidance, which could delay hope of another buyout offer.