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Sprint (S) Misses Q3 Earnings Estimate Despite Higher Revenues
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Sprint Corporation (S - Free Report) reported mixed third-quarter fiscal 2018 financial results, wherein the top line surpassed the Zacks Consensus Estimate, while the bottom line missed the same. The company reported 12th consecutive quarter of operating income growth on a year-over-year basis and the highest fiscal third quarter adjusted EBITDA in 12 years.
Net Income
Quarterly net loss came in at $141 million or loss of 3 cents per share against a net income of $7,162 million or $1.76 per share in the year-ago quarter. The sharp decline in earnings was primarily attributable to higher operating expenses in the reported quarter and income tax benefit in the year-earlier quarter. The bottom line missed the Zacks Consensus Estimate of loss of 2 cents.
Quarterly total net operating revenues increased to $8,601 million from $8,239 million in the year-ago quarter driven by higher wireless revenues. The top line surpassed the Zacks Consensus Estimate of $8,403 million. Overall service revenues were $5,699 million, down from $5,930 million in the year-ago quarter, while overall equipment sales totaled $1,589 million, up from $1,262 million. Equipment rentals increased to $1,313 million from $1,047 million.
Segmental Performance
Total net wireless operating revenues were $8,351 million compared with $7,928 million in the year-ago quarter primarily due to higher equipment sales and rentals. Total service revenues declined to $5,449 million from $5,619 million in the prior-year quarter. Postpaid revenues totaled $4,236 million and prepaid revenues were $924 million. Wholesale, affiliate and other revenues were $289 million. The segment’s operating income was $609 million compared with $509 million in the year-ago period, benefiting from higher revenues. Adjusted EBITDA was $3,111 million compared with $2,759 million in the prior-year period for respective margins of 57.1% and 49.1%.
Net operating wireline revenues were $316 million compared with $393 million a year ago. Operating loss for the segment was $67 million against operating income of $229 million in the year-ago quarter.
Other Operating Metrics
Total net operating expenses increased to $8,122 million from $7,512 million. Operating income for the reported quarter was $479 million compared with $727 million a year ago, supported by higher operating revenues. Overall adjusted EBITDA was $3,101 million compared with $2,719 million and overall adjusted EBITDA margin improved to 54.4% from 45.9%.
Cash Flow and Liquidity
For the first nine months of fiscal 2018, Sprint generated $7,582 million of net cash from operating activities compared with $7,409 million in the prior-year period.
Year to date, adjusted free cash outflow was $375 million compared with $1,185 million in the year-ago period.
As of Dec 31, 2018, Sprint had $6,191 million of cash and cash equivalents with long-term debt, financing and capital lease obligations of $36,288 million.
Outlook Reaffirmed
Sprint reiterated its earlier guidance and continues to expect adjusted EBITDA in the range of $12.4 billion to $12.7 billion. Excluding the impact of the new revenue recognition standard, it expects adjusted EBITDA between $11.7 billion and $12 billion.
Cash capital expenditures, excluding leased devices, are projected in the range of $5 billion to $5.5 billion.
Going Forward
Sprint remains on track to launch its mobile 5G network in the near future in nine of the largest cities in the country, namely Atlanta, Chicago, Dallas, Houston, Kansas City, Los Angeles, New York City, Phoenix and Washington, D.C. Standards-based 5G devices from LG, HTC, and Samsung are also expected to be available soon. We believe that Sprint’s strategy of balancing growth and profitability while increasing network investments and adding digital capabilities will likely drive its financial performance in the coming quarters. Also, the company’s multi-year plan to improve cost structure, and its "Unlimited for All" plan designed for customers, bode well.
ATN International has delivered an average positive earnings surprise of 138.1% in the trailing four quarters, beating estimates thrice.
United States Cellular Corporation delivered an average positive earnings surprise of 108.1% in the trailing four quarters, beating estimates in each.
Sprint has a long-term earnings growth expectation of 19.6%. It delivered an average positive earnings surprise of 320.8% in the trailing four quarters, beating estimates on each occasion.
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Sprint (S) Misses Q3 Earnings Estimate Despite Higher Revenues
Sprint Corporation (S - Free Report) reported mixed third-quarter fiscal 2018 financial results, wherein the top line surpassed the Zacks Consensus Estimate, while the bottom line missed the same. The company reported 12th consecutive quarter of operating income growth on a year-over-year basis and the highest fiscal third quarter adjusted EBITDA in 12 years.
Net Income
Quarterly net loss came in at $141 million or loss of 3 cents per share against a net income of $7,162 million or $1.76 per share in the year-ago quarter. The sharp decline in earnings was primarily attributable to higher operating expenses in the reported quarter and income tax benefit in the year-earlier quarter. The bottom line missed the Zacks Consensus Estimate of loss of 2 cents.
Sprint Corporation Price and EPS Surprise
Sprint Corporation Price and EPS Surprise | Sprint Corporation Quote
Revenues
Quarterly total net operating revenues increased to $8,601 million from $8,239 million in the year-ago quarter driven by higher wireless revenues. The top line surpassed the Zacks Consensus Estimate of $8,403 million. Overall service revenues were $5,699 million, down from $5,930 million in the year-ago quarter, while overall equipment sales totaled $1,589 million, up from $1,262 million. Equipment rentals increased to $1,313 million from $1,047 million.
Segmental Performance
Total net wireless operating revenues were $8,351 million compared with $7,928 million in the year-ago quarter primarily due to higher equipment sales and rentals. Total service revenues declined to $5,449 million from $5,619 million in the prior-year quarter. Postpaid revenues totaled $4,236 million and prepaid revenues were $924 million. Wholesale, affiliate and other revenues were $289 million. The segment’s operating income was $609 million compared with $509 million in the year-ago period, benefiting from higher revenues. Adjusted EBITDA was $3,111 million compared with $2,759 million in the prior-year period for respective margins of 57.1% and 49.1%.
Net operating wireline revenues were $316 million compared with $393 million a year ago. Operating loss for the segment was $67 million against operating income of $229 million in the year-ago quarter.
Other Operating Metrics
Total net operating expenses increased to $8,122 million from $7,512 million. Operating income for the reported quarter was $479 million compared with $727 million a year ago, supported by higher operating revenues. Overall adjusted EBITDA was $3,101 million compared with $2,719 million and overall adjusted EBITDA margin improved to 54.4% from 45.9%.
Cash Flow and Liquidity
For the first nine months of fiscal 2018, Sprint generated $7,582 million of net cash from operating activities compared with $7,409 million in the prior-year period.
Year to date, adjusted free cash outflow was $375 million compared with $1,185 million in the year-ago period.
As of Dec 31, 2018, Sprint had $6,191 million of cash and cash equivalents with long-term debt, financing and capital lease obligations of $36,288 million.
Outlook Reaffirmed
Sprint reiterated its earlier guidance and continues to expect adjusted EBITDA in the range of $12.4 billion to $12.7 billion. Excluding the impact of the new revenue recognition standard, it expects adjusted EBITDA between $11.7 billion and $12 billion.
Cash capital expenditures, excluding leased devices, are projected in the range of $5 billion to $5.5 billion.
Going Forward
Sprint remains on track to launch its mobile 5G network in the near future in nine of the largest cities in the country, namely Atlanta, Chicago, Dallas, Houston, Kansas City, Los Angeles, New York City, Phoenix and Washington, D.C. Standards-based 5G devices from LG, HTC, and Samsung are also expected to be available soon. We believe that Sprint’s strategy of balancing growth and profitability while increasing network investments and adding digital capabilities will likely drive its financial performance in the coming quarters. Also, the company’s multi-year plan to improve cost structure, and its "Unlimited for All" plan designed for customers, bode well.
Zacks Rank and Other Stocks to Consider
Sprint currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the industry include ATN International, Inc. (ATNI - Free Report) , United States Cellular Corporation (USM - Free Report) and Gogo Inc. (GOGO - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ATN International has delivered an average positive earnings surprise of 138.1% in the trailing four quarters, beating estimates thrice.
United States Cellular Corporation delivered an average positive earnings surprise of 108.1% in the trailing four quarters, beating estimates in each.
Sprint has a long-term earnings growth expectation of 19.6%. It delivered an average positive earnings surprise of 320.8% in the trailing four quarters, beating estimates on each occasion.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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