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Sprint (S) to Report Q1 Earnings: What's in the Offing?

Zacks Equity Research

Sprint Corporation S is scheduled to report first-quarter fiscal 2019 financial results on Aug 2, before the opening bell. In the last reported quarter, the company delivered a negative earnings surprise of 100%.

The U.S. communications service provider is likely to report lower overall revenues on a year-over-year basis due to enduring challenges, which have put pressure on its service revenues and retail customer growth.

It should be noted that starting fiscal first quarter, the company decided to discontinue reporting average billings per user and average billings per account — metrics that provided transparency during the transition from subsidy to device financing rate plans that are no longer relevant. Instead, it has focused on average revenue per account that is consistent with its strategy to grow revenues at the account level.

Let’s find out how things are shaping up prior to the announcement.

Factors at Play

Sprint’s strategy of balancing growth and profitability while increasing network investments and adding digital capabilities, remain impressive. During the June quarter, it unveiled 5G technology in Atlanta, Dallas-Fort Worth, Houston, Kansas City and Chicago. The company intends to augment its 5G footprint in the nation, covering about 2,180 square miles and 11.5 million people across nine market areas.

Despite the positives, beginning fiscal first quarter, Sprint faced a year-over-year headwind on SG&A expenses from the new revenue recognition standard’s impact on the optimization of commission expenses. The Zacks Consensus Estimate for net operating revenues from the wireless segment, which accounts for the lion’s share of total revenues, is currently pegged at $7,772 million. It reported $7,845 million a year ago.

Net operating revenues from the wireline segment are expected to be $299 million. It reported $338 million in the year-ago quarter. Consequently, for the fiscal first quarter, the Zacks Consensus Estimate for total revenues stands at $8,052 million. It reported $8,125 million in the prior-year quarter. Adjusted loss per share is pegged at 3 cents, down from earnings of 4 cents posted a year ago.

What Our Model Says

Our proven model shows that Sprint is likely to beat earnings estimates this quarter as it possesses both the key components. 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. This is exactly the case here as you’ll see below:

Earnings ESP: Sprint’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +195.59% as the former is pegged at earnings of 3 cents and the latter at loss of 3 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sprint Corporation Price and EPS Surprise

Sprint Corporation Price and EPS Surprise

Sprint Corporation price-eps-surprise | Sprint Corporation Quote

Zacks Rank: Sprint currently has a Zacks Rank #3, which increases the predictive power of ESP and makes us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Telephone and Data Systems, Inc. TDS with an Earnings ESP of +12.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

TELUS Corp. TU with an Earnings ESP of +2.17% and a Zacks Rank #2.

Ciena Corp. CIEN with an Earnings ESP of +5.26% and a Zacks Rank #2.

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