Will Sprint's (S) 4G Effort Take Hold in Q210?
Shares of Sprint Nextel Corp. (NYSE: S) are trading lower ahead of the company's second quarter earnings report, expected out before the market opens on Wednesday, July 28, 2010. Shares are down 3.2% to $4.89 in the mid-morning session.
Sprint is expected to report a loss of $0.20 per share of revs of $8.03 billion. The company reported an loss of $0.17 per share last quarter, on revs of $8.09 billion, both narrowly beating forecasts. Last year, the company posted a loss of $0.13 and revs of $8.1 billion, both missing views.
Shares of the company gained throughout the quarter, rising 7.2% to $4.18 at the end of June. The stock is trading 28% higher YTD, and increased 19% since the end of the quarter.
On a year-over-year basis, the company has seen a 1.5% reduction in net operating revs for the first quarter. By comparison, Verizon (NYSE: VZ) grew revs 1.2%, and AT&T (NYSE: T) increased just about 0.3%. Price-to-sales for Sprint is 0.44 over the last twelve months, compared to 0.73 for Verizon, and 1.22 for AT&T.
Data from Bloomberg has 12 analysts with a Buy rating, 15 with a Hold, and five suggesting to Sell. The analyst price target average is $4.82, with a high of $7 and a low of $2.50.
Analyst Ratings Through the Quarter
In May, Raymond James upgraded the shares from Market Perform to Outperform.
Goldman Sachs then upgraded the shares from Neutral to Buy with a price target increased from $3.50 to $6.00.
FBR Capital Markets reiterated their Outperform rating and $6.00 price target on Sprint Nextel (NYSE: S) after a conference call with the president Matt Carter in May.
Auriga reiterates a 'Buy' rating on Sprint Nextel (NYSE: S), price target $6, noting that long-term potential for Sprint to buy shares of Clearwire as a high class problem down the road, and not a good enough reason for investors to sell in the near-term.
Summary
Many analysts believe that postpaid subscriber trends have improved, but the company is still likely to post a net loss of subs. The Wall Street Journal reports that Sprint is likely to report a net loss of 50K - 150K wireless customers, many from Sprint's Nextel segment, which has been bleeding subs ever since the $35 billion acquisition was completed in 2005.
Deutsche Bank thinks that Sprint will report a net loss of 400K subs, down from their prior estimate of (500K), mostly due in part to the HTC EVO 4G. They see continued adds going into H210, reiterating a Buy rating and $6 price target. They sees Sprint reporting revs of $8B and a loss of ($0.23) per share, both lower than consensus estimates.
Morgan Stanley also sees slowdown in postpaid subs, adding just 199K, compared to the consensus of 315K. MS also sees pressure in margins, pointing to cost-cutting measures, though revenue growth should drive margin improvements.
This may be the quarter to begin improvement, as Sprint hasn't reported a profit or sub increase since mid-2007, according to the AP. Last quarter, the company only lost 75,000 subs. And really, who could argue? With trouble at Apple (Nasdaq: AAPL) with their new iPhone 4, and AT&T’s still-spotty (though improving) network, Sprint may just have the lineup and pricing to come out ahead for the balance of 2010. Their HTC EVO 4G is sold out currently, but the company still offers a plethora of Google’s (Nasdaq: GOOG) Android-enabled devices that could satiate any technology appetite, 4G or not. Speaking of which, this quarter, and the next several, should still focus around 3G. The new network is only available in a few select markets right now, so this should be a long-term play for investors. Though, the marketing appeal of a 4G phone in a sea of 3G’s should help Sprint’s cause.
Final note: Dan Schulman, President of Prepaid, announced that he would leave the company at the end of August. This may put a wrench in the works of an effort for Sprint to gain more prepaid market share going forward, though it won't affect the company's second quarter results.
Sprint Nextel Corp.. is expected to release their Q210 earnings on Wednesday, July 28, 2010, at approximately 7:00am EDT. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
Create E-mail AlertRelated Categories
Insiders' BlogTrader Talk
Stocks Mentioned
+2.59
-5.35Related Entities
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
