NeuStar shares tumble after 2008 sales forecast reduction

Shares of NeuStar Inc. tumbled Thursday after the provider of clearinghouse services for communications companies lowered its 2008 revenue forecast and gave a weak profit outlook for the year.

Credit Suisse analyst Philip Winslow downgraded the company to "Neutral" from "Outperform," noting that the company's revenue outside of telephone number portability contracts was below his expectations.

"Although transactions (under these contracts) in the quarter exceeded our expectations, the company's non-transaction revenue fell below our estimates, and the company again guided to another sequential decline in transactions for the June quarter," he wrote in a note to investors.

NeuStar forecast 2008 revenue of $500 million to $515 million, compared with a previous forecast of more than $515 million. Analysts polled by Thomson Financial expect sales of $512.3 million.

Wedbush Morgan analyst Scott Sutherland, meanwhile, kept a "Strong Buy" rating on NeuStar and said he'd buy the stock on weakness. The quarter's strong results, he said, were driven by better-than-expected revenue and margins. The company's adjusted earnings and revenue surpassed Wall Street's expectations.

Sutherland said he continues to be disappointed by the underperformance of NeuStar's next generation messaging unit, but noted that it represents less than 5 percent of total sales.

But he added that he thinks NeuStar's "strong fundamentals remain intact" as the strong performance of its other business units and margins are helping push earnings per share above expectations.

Shares fell $4.41, or 15.6 percent, to $23.94. The Sterling, Va.-based company's shares have traded between $21.33 and $36.33 over the past year.