R.H. Donnelly's stock has plummeted to $2 from $68 on fears its debt will drag it into bankruptcy. If its business stabilizes, however, the stock could rally. The bonds also look good.

I wouldn’t short RHD right now, counsels Karen Finerman. They have a great deal of debt on the books and typically people who use the yellow pages are people who have just moved to a new neighborhood. With home sales down that’s not good for RHD, either.

RH Donnelley (RHD) was downgraded from Hold to Sell, Deutsche Bank said. $5 price target. Company is losing managers and cut its dividend. A major debt restructuring is also likely.

RH Donnelley (RHD) was downgraded from Buy to Hold, Deutsche Bank said. Like IAR, the company will likely struggle with structural and cyclical issues. Company also has a high level of financial leverage. $25 price target.

R.H. Donnelley Corp. recently announced that it expects advertising sales of about $2.75 billion in 2008. The Cary, N.C., telephone directory publisher also forecast free cash flow of at least $620 million and operating cash flow of $710 million next year. The company affirmed its 2007 outlook, except that it now expects weighted average fully diluted shares outstanding for the year of 72 million vs. previous guidance of 72.5 million.

Donnelley also said its board approved the buyback of up to $100 million of its common shares.

The stock trades for 8x cash flow.

Goldman Sachs said it is downgrading R.H. Donnelley (RHD) to Neutral from Buy based on deteriorating local ad trends. Impact from slowing housing market and negative trends in the company's major metro markets are having a greater impact than originally anticipated. Price target cut to $67 from $77.

Upgraded by JP Morgan from Neutral to Overweight

deveraging play

Upgraded by Deutsche Securities from Hold to Buy

dying model