Verizon Communications Inc.

BELLATRIX EXPLORATION, $4.97, symbol BXE on Toronto, is up over 21% this week after it announced a joint venture agreement with an unnamed South Korea-based investment fund. This deal should speed up development of Bellatrix’s undeveloped Cardium shale oil deposits in west-central Alberta. The South Korean partner will pay $150 million for 33% of production from a planned 83-well drilling program. In addition, Bellatrix will now spend a total of $230 million to $240 million on exploration and development this year, up from its earlier forecast of $180 million. The company expects its daily production to average 24,000 to 25,000 barrels of oil equivalent (including natural gas) per day this year. It could also end 2013 with production as high as 30,000 to 31,000 barrels per day. To put that in perspective, Bellatrix likely ended 2012 with average production of 19,000 to 19,500 barrels a day....

CONAGRA FOODS INC., $32.33, New York symbol CAG, is our “Stock of the Year” for 2013. ConAgra began processing grain at just four mills in Nebraska in 1919. Over the decades, it grew into one of North America’s leading food companies. In the past few years, it has sold off its fresh food operations to focus solely on its more profitable packaged food businesses. The company recently announced a major acquisition that will give it a larger share of the fast-growing private label food business. While private label foods now account for 18% of packaged food sales in the U.S., most of them just aren’t that good. That provides an opportunity for ConAgra, since it has the expertise to make branded stuff, and it can apply it to private labels....

Most Windstream and Frontier Communications investors probably received their shares as special dividends. While these firms’prospects aren’t as bright as bigger companies we recommend, like AT&T and Verizon, they are still worth holding for their steady dividends.

WINDSTREAM CORP....

FRONTIER COMMUNICATIONS CORP. $4.55 (Nasdaq symbol FTR; Income Portfolio, Utilities sector; Shares outstanding: 998.4 million; Market cap: $4.5 billion; Price-to-sales ratio: 0.9; Dividend yield: 8.8%; TSINetwork Rating: Average; www.frontier.com) sells phone, Internet and video services to 4.9 million customers in 27 states.

In July 2010, the company purchased Verizon’s telephone businesses in 14 states. In return, Verizon shareholders received 0.24 shares of Frontier for each Verizon share they held.

In the quarter ended September 30, 2012, Frontier’s earnings jumped 228.5% to $67.0 million, or $0.07 a share. A year earlier, it earned $20.4 million, or $0.02 a share. Even if you disregard unusual items, earnings per share would have risen 40.0%. That’s partly because Frontier is selling more Internet and video services. However, it continues to lose traditional phone customers to wireless providers. That’s why its revenue fell 3.0%, to $1.25 billion from $1.3 billion.
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ALCOA INC., $8.94, New York symbol AA, reported sharply lower earnings for 2012. However, that’s mainly because the company cut bulk aluminum production in response to low prices. It’s also moving into more profitable businesses, such as manufacturing parts for cars and airplanes. Alcoa’s earnings fell 66.7% in 2012, to $0.24 a share. This figure excludes unusual items, such as gains on asset sales and costs to close plants. On this basis, the latest earnings easily beat the consensus estimate of $0.18. The company earned $0.72 a share in 2011. Revenue fell 5.0%, to $23.7 billion from $25.0 billion. Even so, that exceeded the consensus revenue estimate of $23.4 billion. Aluminum shipments rose 3.2%, but average prices fell 11.7%....

AIMIA INC., $15.34, symbol AIM on Toronto, has agreed to raise its stake in the loyalty program of Grupo Aeromexico, Mexico’s biggest airline. Aimia will pay $88 million U.S. to raise its interest in Club Premier Loyalty & Marketing to 49% from 29%. Grupo Aeromexico will continue to own 51%. Club Premier is Mexico’s leading loyalty program, with more than 2.8 million members and 50 partners. Club Premier members can earn and redeem points on Aeromexico, which offers 550 daily flights throughout the Americas and to Europe and Asia. As well, members can earn points on 14 other airlines, including China Eastern, Delta and Air France-KLM. They also get points for using their American Express and Banamex co-branded credit cards....

MANITOBA TELECOM SERVICES INC. $33.45 (Toronto symbol MBT; Shares outstanding: 66.7 million; Market cap: $2.2 billion; TSINetwork Rating: Average; Dividend yield: 5.1%; www.mts.ca) gets 55% of its revenue from its MTS division, which has over 1.3 million telephone and wireless customers in Manitoba.

The remaining 45% comes from its Allstream division, which sells voice and data communication services to Canadian companies.

Manitoba Tel is now conducting a strategic review of Allstream. This could lead to a sale of some or all of this business.

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American Tower, $75.35, symbol AMT on New York (Shares outstanding: 395.2 million; Market cap: $29.8 billion; www.americantower.com), is the largest independent operator of wireless-communications and broadcast towers. The company has 45,220 towers in the U.S., Mexico, Brazil, Chile, Colombia, Peru, Ghana, South Africa and India. American Tower leases its sites to wireless companies. AT&T, Sprint Nextel, Verizon Wireless and T-Mobile account for 74% of American Tower’s revenue. The company recently agreed to buy up to 2,126 towers in Colombia from Colombia Movil for $182 million in cash. American Tower will lease these towers, as well as new towers it plans to build in Colombia, back to Colombia Movil....

MANITOBA TELECOM SERVICES INC. $33.45 (Toronto symbol MBT; Shares outstanding: 66.7 million; Market cap: $2.2 billion; TSINetwork Rating: Average; Dividend yield: 5.1%; www.mts.ca) gets 55% of its revenue from its MTS division, which has over 1.3 million telephone and wireless customers in Manitoba. The remaining 45% comes from its Allstream division, which sells voice and data communication services to Canadian companies. Manitoba Tel is now conducting a strategic review of Allstream. This could lead to a sale of some or all of this business....

INTERNATIONAL BUSINESS MACHINES CORP., $207.45, New York symbol IBM, continues to expand its software business. In the three months ended June 30, 2012, software accounted for 24% of its total revenue and 43% of its pre-tax earnings. This week, the company paid an undisclosed sum for U.K.-based Butterfly Software Ltd. Businesses use this private firm’s software to collect data from older computers and securely transfer it to remote servers. Butterfly’s products nicely complement IBM’s growing analytics software operations, which help companies quickly gather and analyze a wide range of information....