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Sprint (S) Q3 Loss Wider than Expected, FY16 View Raised

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Sprint Corp. S reported mixed financial results for the third quarter of fiscal 2016 (ended Dec 31, 2016). The company’s bottom line was far below the Zacks Consensus Estimate. Revenues beat the Zacks Consensus Estimate.

This Zacks Rank #3 (Hold) stock faces fierce competition in the U.S. wireless market from the likes of Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. T and T-Mobile US Inc. TMUS. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quarterly net loss was $479 million, or 12 cents per share compared with net loss of $836 million, or 21 cents per share, in the year-ago period, reflecting an improvement of $357 million, or 9 cents. Also, fiscal third-quarter adjusted net loss per share was wider than the Zacks Consensus Estimate of a loss of 8 cents.

Quarterly total revenue came in at $8,549 million, up 5.45% year over year and ahead of the Zacks Consensus Estimate of $8,262 million. Service revenues were $6,323 million, down 5.4% while Equipment revenues totaled $2,226 million, up a substantial 56.3%.

Operating Metrics

Operating expenses were $8,238 million, down 0.8% year over year. Operating income of $311 million in the quarter compared to an operating loss of $197 million in the year-ago period, reflecting an improvement of $508 million. Adjusted EBITDA was $2.5 billion in the quarter compared with $1.9 billion in the year-ago period, reflecting an increase of approximately $552 million or 29%.

Cash Flow

In the third quarter of fiscal 2016, Sprint generated $650 million of cash from operations compared with $806 million in the year-ago period. Adjusted free cash flow was negative $646 million compared with positive $339 million in the year-ago period. The prior-year quarter included $1.1 billion of proceeds from the first sale-leaseback transaction with Mobile Leasing Solutions, LLC (MLS), while this quarter included a cash outflow of approximately $370 million related to the repurchase of the devices sold in the first MLS transaction.

Liquidity

At the end of the quarter under review, Sprint had $3,707 million of cash and marketable securities compared with $2,175 million at the end of fiscal 2015. Total long-term debt outstanding, at the end of the reported quarter, was $30,759 million compared with $29,268 million at the end of fiscal 2015.

Wireless Segment

Total segment revenue was $5,946 million compared with $6,219 million in the year-ago quarter. Postpaid revenues totaled $4,686 million compared with $4,813 million in the year-ago quarter. Prepaid revenues were $1,077 million compared with $1,224 million in the year-ago quarter. Wholesale and other revenues were $183 million compared with $182 million in the year-ago quarter.

Wireline Segment

Total segment revenue was $497 million compared with $581 million in the year-ago quarter. Voice revenues totaled $153 million compared with $201 million in the year-ago quarter. Data revenues were $41 million versus $42 million in the prior-year quarter. Internet revenues were $281 million compared with $317 million in the year-ago quarter. Other revenues were $22 million compared with $21 million in the year-ago quarter.

Subscriber Statistics

In the reported quarter, Sprint added 577,000 total wireless connections, including postpaid net additions of 405,000, prepaid net losses of 501,000, and wholesale and affiliate net additions of 673,000. Total postpaid churn was 1.67% and postpaid phone churn was 1.57%.

Quarterly total retail postpaid churn rate was 1.67% compared with 1.62% in the year-ago quarter. Total retail prepaid churn rate was 5.80%, down from 5.82% in the prior-year quarter. Total retail postpaid ARPU (average revenue per user) was $49.70 versus $52.48 at the end of fiscal 2015. Total retail prepaid ARPU was $27.61 versus $27.44 at the end of fiscal 2015.

Sprint Corporation Price, Consensus and EPS Surprise

 

Sprint Corporation Price, Consensus and EPS Surprise | Sprint Corporation Quote

Fiscal 2016 Outlook

Sprint raised its fiscal 2016 outlook. The company now expects operating income of $1.4 billion to $1.7 billion, above the previous range of $1.2 billion to $1.7 billion. Cash capital expenditures, excluding devices leased through indirect channels, is now projected in the range of $2 billion to $2.3 billion. The company’s previous expectation was less than $3 billion. Adjusted free cash flow is projected at around a breakeven. Adjusted EBITDA is now projected in the range of $9.7 billion to $10 billion instead of $9.5 billion to $10 billion guided previously.

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