Convergys Dn 16%; Met 2Q Views But Hurt By Nokia
Warning
Dow Jones Newswires
By K. Maxwell Murphy
NEW YORK -- A testimony to their fickle nature, investors beat down shares of Convergys Corp. (CVG) 16.8% Thursday after the company did exactly what the Street expected it to do, earnings-wise at least.
Convergys posted second-quarter net income of 29 cents a diluted share, matching the consensus estimate provided by First Call/Thomson Financial.
Three factors hamstrung the Cincinnati billing and customer management services company, according to CIBC World Markets Corp. analyst Hampton Adams.
The company has historically beaten quarterly earnings views by about a penny, he said, and investors were looking for this quarter to be no different. He also noted that in today's uneasy markets, investors are selling off virtually every stock as soon as they post earnings, regardless of the
results.
Finally, Adams said Nokia Corp.'s (NOK) warning of relatively weak third-quarter earnings harangued every company with ties to cellular phones.
A significant number of Convergys clients are in the wireless arena.
Also Thursday, the company announced that it had signed a pact with Verizon Communications (VZ). A company spokesman could not release details of the pact, but emphatically pronounced it
"huge."
Adams said he believes it is a big deal, and could be even bigger, but it is tough to tell at this early stage, since Verizon's newly merged component companies, Bell Atlantic and GTE, were already customers.
Regardless, Adams called the selloff an overreaction, and said he is very comfortable with his buy rating, $60 12-month price target, and fundamental model for the company.
He also mentioned the company's earnings conference call, in which Convergys said it had shored up its contracts with Media One, which was recently acquired by AT&T Corp. (T).
The Convergys spokesman confirmed that it is, in fact, a done deal and contracts have been signed.
Shares of Big Board-listed Convergys closed at 43 3/4 Thursday, down 8 27/32, or 16.8%, on volume of 3.75 million shares, compared with average daily volume of 802,800.
-By K. Maxwell Murphy, Dow Jones Newswires; 201-938-5173;
maxwell.murphy@dowjones.com |
