You've got to feel for the executives at Aliant Inc.: Not only are they struggling to boost revenue and profit in a highly competitive market, but they are having to do it beneath the mantle of "Canada's Lowest-Rated Stock."
Atlantic Canada's dominant phone company currently sports the lowest average analyst rating among stocks listed on the benchmark S&P/TSX composite index, according to Bloomberg analytics.
CIBC World Markets analyst Dvai Ghose was not surprised to hear that Saint John-based Aliant is not in favour among his peers. He has a "sector underperformer" rating on the stock and lowered his stock target price in January in the wake of its financial results.
"Aliant in operating one of the worst competitive environments in Canada and their response has been inadequate," he said.
And more analysts agree with Mr. Ghose than disagree, unfortunately for Aliant. Of the ten analysts who follow Aliant and are tracked by Bloomberg, six rate the stock "sell" and four rate it "hold." That gives the stock a Bloomberg rating of 2.1, well below the 3.58 average rating for the S&P/TSX composite. The highest rating is four.
Aliant has been watching its market share and customers slip away since rival cable company EastLink began offering local telephone service in Atlantic Canada in 1999. EastLink has won more than 40 per cent of the central Halifax market from Aliant, according to one analyst estimate.
(Aliant is 53 per cent owned by Bell Canada, the telephone arm of BCE Inc. of Montreal.)
A recent deal between Halifax-based Eastlink and cellular provider Rogers Wireless Communications Inc. provides EastLink customers with mobile phone service, and the company now provides a bundle of high-speed Internet, cable and telephony.
In response, Aliant unveiled plans in January to introduce Internet-based TV services in Halifax in the second quarter of 2005, and in the following quarter, will launch its own VoIP service.
"Things are being addressed, but slowly. For most people, the assault on Aliant's business is more aggressive than their response," said Mr. Ghose.
The company, which he says has not spent enough on its networks, was slow to come up with a strategy on both cable and high-speed Internet. In addition, executives are running the business as a cash cow.
"If you are using your business as a cash cow, you lose out in a competitive landscape," Mr. Ghose said. "If that is the strategy they want to pursue, why don't they just become an income trust?"
Shares of Aliant, which were trading at more than $31 a share a year ago, have rebounded somewhat from a low of $25 in August. The stock, down 5 per cent in the last year, rose 2 cents to $28.67 in Toronto Thursday.
Desjardins Securities analyst Joseph MacKay cut the company to "hold" from "buy" and lowered his stock price target to $28 from $30.50 after the release of its latest results in January.
At the time, Aliant reported that profit in its fourth-quarter plunged 80 per cent on the back of costs for early retirement packages. Sales also slid, as a 15-per-cent rise in wireless sales wasn't enough to counter the impact of a strike and a 16-per-cent drop in long-distance revenue.
The company also provided lower-than-expected earnings estimates for 2005 and raised its annual dividend by 8 cents to $1.18 a share. Aliant will release its first quarter financial results on April 28.
Kona Shio, an analyst at Montreal-based Conscius Capital Partners, does not believe Aliant will attract many investors by raising its dividend.
"It is hard to be bullish on this stock," he said. He has a "sell" rating on it. "Wireless is still growing rapidly but they don't have as much exposure to that as Telus Corp. Their dividend is already high, so that won't push the stock up."
Still, he does not believe that a low rating among analysts is necessarily a bad thing.
"The consensus does not mean anything," he said. "It might even mean there is a buying opportunity."
Except for all the "sell" recommendations, that is.