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Sprint (S) Down 5.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Sprint (S). Shares have lost about 5.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sprint due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Sprint Incurs Q1 Loss as Expected, Beats on Revenues

Sprint reported healthy first-quarter fiscal 2019 financial results, wherein the top line increased year over year and surpassed the Zacks Consensus Estimate.

Net Loss

For the June quarter, net loss was $111 million or loss of 3 cents per share against net income of $176 million or 4 cents per share in the year-ago quarter. The sharp decline was primarily due to higher net operating expenses. The bottom line matched the Zacks Consensus Estimate of loss of 3 cents.

Revenues

Quarterly total net operating revenues increased to $8,142 million from $8,125 million in the year-ago quarter mainly driven by higher equipment rentals. The top line surpassed the Zacks Consensus Estimate of $8,024 million. Overall service revenues were $5,563 million, down from $5,740 million in the year-ago quarter, while equipment sales totaled $1,220 million, up from $1,173 million. Equipment rentals increased to $1,359 million from $1,212 million.

Segment Results

Total net wireless operating revenues were $7,901 million compared with $7,845 million in the year-ago quarter, primarily due to higher equipment sales and rentals. Total service revenues declined to $5,322 million from $5,460 million. Postpaid revenues totaled $4,199 million and prepaid revenues were $843 million. Wholesale, affiliate and other revenues summed $280 million. The segment’s operating income was $590 million compared with $1,002 million in the year-ago quarter. Adjusted EBITDA was $3,037 million compared with $3,318 million in the prior-year quarter for respective margins of 57.1% and 60.8%.

Net operating wireline revenues were $307 million compared with $338 million a year ago. Operating loss for the segment was $54 million compared with operating loss of $96 million in the year-ago quarter.

Other Details

Total net operating expenses increased to $7,687 million from $7,310 million. Consequently, operating income for the reported quarter was $455 million compared with $815 million a year ago. Overall adjusted EBITDA was $3,042 million compared with $3,280 million and adjusted EBITDA margin declined to 54.7% from 57.1%.

Cash Flow & Liquidity

During the first quarter of fiscal 2019, Sprint generated $2,244 million of net cash from operating activities compared with $2,430 million in the year-ago quarter. As of Jun 30, 2019, the wireless carrier had $4,869 million in cash and equivalents with $35,073 million of long-term debt and finance lease obligations.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 33.33% due to these changes.

VGM Scores

Currently, Sprint has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Sprint has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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