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Sprint: What to Watch For in Its Q2 Earnings

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Oct. 31 2019, Published 1:14 p.m. ET

Sprint (S) is set to release its second-quarter earnings results on November 4 before the market bell. The company’s second quarter ended on September 30. It won’t host a conference call with analysts after releasing its earnings results.

Before we dive into the telecommunications player’s second-quarter numbers, let’s recap its first-quarter performance compared to estimates.

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Sprint’s earnings

In the first quarter, Sprint reported adjusted EPS of -$0.03 compared to $0.04 in the previous year’s quarter. Analysts expected adjusted EPS of -$0.04 in the first quarter. The company’s adjusted net income attributable to shareholders fell from $176 million in the first quarter of 2018 to -$111 million in the first quarter of 2019. The company’s adjusted EBITDA also fell 7.3% YoY (year-over-year) to $3.0 billion in the first quarter. This significant reduction in adjusted EBITDA was the result of lower wireless service revenue.

In the first quarter, Sprint gained 134,000 postpaid net subscribers. However, the company reported net losses of 128,000 postpaid phone subscribers. The reduction in its number of postpaid phone customers was the result of lower promotional service pricing and a higher churn rate. The company also lost net 169,000 prepaid customers.

In the second quarter, analysts expect Sprint’s adjusted EPS to reach -$0.02 compared to $0.05 in the second quarter of 2018. Wall Street expects the wireless carrier to report adjusted EPS of -$0.08 in 2019 and -$0.09 in 2020.

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Sprint’s revenue

Analysts expect Sprint’s total revenue to fall 3.1% YoY and reach $8.2 billion in the second quarter due to customer losses. In the second quarter, Sprint will likely report net losses of 150,000 prepaid customers and 175,000 postpaid phone customers. The company is expected to report a postpaid phone churn rate of 1.85% in the second quarter.

Wall Street also expects the company’s net revenue to fall 2.2% YoY to $32.8 billion in 2019 and 1.1% YoY to $32.5 billion in 2020.

In the first quarter, Sprint reported revenue of $8.14 billion, which beat analysts’ consensus estimate of $8.06 billion. The company’s first-quarter revenue rose 0.2% YoY from $8.13 billion in the first quarter of 2018. The YoY increase in its net operating revenue was the result of higher equipment rentals and sales.

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Peer comparison

AT&T’s (T) third-quarter revenue of $44.6 billion missed analysts’ forecast of $45.0 billion, and its adjusted EPS of $0.94 beat their estimate of $0.93. In the third quarter of 2018, the company reported adjusted EPS of $0.90 on total revenue of $45.7 billion.

In the third quarter, T-Mobile (TMUS) reported adjusted EPS of $1.01, 8.6% higher than its adjusted EPS of $0.93 in the previous year’s quarter. Analysts expected the company to report adjusted EPS of $0.96 in the third quarter. The company’s revenue rose 2.0% YoY to $11.1 billion, which missed analysts’ consensus estimate of $11.3 billion.

AT&T reported 101,000 postpaid phone subscriber net additions in the quarter that ended on September 30, which beat analysts’ expectation of 61,000. T-Mobile reported 754,000 postpaid phone subscriber net additions, which beat analysts’ expectation of 742,600.

Merger with T-Mobile

In April 2018, Sprint and T-Mobile agreed to merge. However, the $26.5 billion merger deal is still pending. The merger deal faces a court challenge from a group of states to stop the combination. The lawsuit alleges that the merger will hurt wireless consumers. A court hearing will begin in December.

The US Department of Justice and the Federal Communications Commission have approved the proposed merger between T-Mobile and Sprint. T-Mobile expects to complete its merger with Sprint in 2020. For more on the deal, see T-Mobile Provides an Update on Its Merger with Sprint.

Stock returns

Sprint has delivered a return of 7.6% year-to-date as of October 30. T-Mobile and AT&T have risen 30.9% and 33.9%, respectively, so far this year. On October 30, Sprint’s closing price was $6.26. The stock is trading 15.1% above its 52-week low of $5.44 and 22.3% below its 52-week high of $8.06.

Sprint stock has fallen 2.0% in the last five trading days. However, the stock has risen 1.5% in the trailing-one-month period and 10.2% in the trailing-12-month period. Currently, Sprint’s market cap is $25.6 billion.

According to Wall Street analysts, Sprint stock has a mean price target of $6.65, suggesting an estimated upside of 6.2% for the next year. Of the 18 analysts covering Sprint, 14 recommend “holds,” three recommend “sells,” and one recommends a “buy.”

Read Will Sprint Stock Jump Following Merger Approval? and Sprint Expands Its 5G Network Coverage in Nine Cities to learn more.

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