Sprint's (S) Turnaround Gaining Momentum - FBR

FBR Analyst David Dixon thinks Sprint's (NYSE: S) turnaround story is picking up speed with another quarter of positive postpaid net add growth and historically low churn. Mr Dixon appears to be the lead bull with this rosy assessment as the company is missing revenue projections and dropping profit guidance.

Revenues declined 6.0% YOY to $8.0B, below consensus of $8.1B driven by lower wireless service revenues from a higher number of subscribers on EIP plans and lower wireline revenues. Even though services revenues dropped,, 2Q saw net adds of 553,000, versus losses of 272,000 in the prior-year period. Net ads were even positive in October despite recent price increases in unlimited data plans which are now $70/month vs $60/month.

Adjusted EBITDA of $2.0B was ahead of the Street's $1.9B estimate but management lowered FY15 adjusted EBITDA guidance to the lower end of the $7.2B–$7.6B range.

Other key metrics in the quarter:

• postpaid net adds of 553,000
• churn of 1.54%
• ARPU of $54.02
• Triband devices: 55% of Sprint's customer base

FY15 estimates for Revenue, EBITDA and EPS are dropping reflecting lower wireless service revenues. However, he maintains his Outperform rating and $6 PT. The investment thesis revolves around devices with 800 MHz and 2.5 GHz spectrum support this year, improving network quality and financial flexibility.

For an analyst ratings summary and ratings history on Sprint click here. For more ratings news on Sprint click here.

Shares of Sprint closed at $4.51 yesterday.

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