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Will Sprint Corp. (S) Beat Earnings Ests Again?

Zacks Equity Research

Sprint Corp. (S) is set to release its first-quarter fiscal 2014 results after the market closes on Apr 29, 2014.

In the last quarter, the company delivered a positive 28.12% earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

2013 proved to be a milestone year for Sprint. The company completed some major merger and acquisition deals with the likes of SoftBank, Clearwire and U.S. Cellular (USM). Also, Sprint has terminated the Nextel network which transformed it from a loss making entity to one of the fastest growing wireless providers in the U.S. Further, the company is nearing its network modernization and integration effort, which will fortify its position in the wireless industry.

The company completed the conversion of 5,000 Clearwire LTE sites in 2013 and expects to alter another 2,000 sites in the first half of the year. By mid 2014, the company expects to begin deploying 2.5 GHz network on selected sites covering around 100 million 2.5 GHz LTE POPs by the end of 2014.

As part of the Network Vision strategy, in 2013, Sprint launched 4G LTE in 340 markets, covering more than 200 million POPs, and expects to cover approximately 250 million LTE POPs by the second half of 2014. In terms of 3G infrastructure, the company expects to see a 25% increase in 3G data speeds with new equipment and enhanced backhaul.

The company also remains focused on developing a HD voice platform, which is expected to cover the entire nation by mid-2014. Currently, the company has over 12 million customers using its HD voice capable handsets.

However, substantial iPhone subsidies, higher spending and competitive threats may act as headwinds for the company while moving ahead.

Earnings Whispers

Our proven model does not conclusively show that Sprint is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are poised at a loss of 6 cents. Hence, the ESP is 0.00%.

Zacks Rank #3 (Hold): Sprint’s Zacks Rank #3 decreases the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks Earnings ESP of 0.00% combined with a Zacks Rank #3 lowers the possibility of an earnings surprise for Sprint.

Other Stocks to Consider

Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

Level 3 Communications, Inc. (LVLT) has Earnings ESP of +10.71% and sports a Zacks Rank #1.

BCE Inc. (BCE) has Earnings ESP of +1.47% and carries a Zacks Rank #3.

America Movil S.A.B. de C.V. (AMX) has Earnings ESP of +31.71% and carries a Zacks Rank #3.

Read the Full Research Report on S
Read the Full Research Report on LVLT
Read the Full Research Report on AMX
Read the Full Research Report on BCE
Read the Full Research Report on USM

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