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Sprint (S) Up 1% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Sprint Corporation (S - Free Report) . Shares have added about 1% in that time frame.

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

Sprint Surpasses Earnings and Revenue Estimates in Q4

Sprint reported healthy fourth-quarter fiscal 2017 results, wherein both the top line and the bottom line surpassed the Zacks Consensus Estimate. 

The U.S. national wireless carrier delivered record financial results with highest ever net income and operating income in fiscal 2017.

Net Income

Net income for the reported quarter improved to $69 million from a net loss of $283 million in the year-ago quarter, supported by lower operating expenses and income tax benefit.

Fiscal 2017 net income was $7,389 million or $1.81 per share against a net loss of $1,206 million or loss of 30 cents per share in fiscal 2016.

Earnings per share for the reported quarter came in at 2 cents against a loss of 7 cents in the previous-year quarter. The bottom line surpassed the Zacks Consensus Estimate of a loss of 6 cents.    

Revenues

Total quarterly revenues decreased 5.3% year over year to $8,083 million due to unstable revenue trends. The top line, however, beat the Zacks Consensus Estimate of $7,999 million. Service revenues were $5,866 million, down 4.1% year over year. Equipment sales totaled $1,081 million, down 31.6%. Equipment rentals increased 35% to $1,136 million.

Fiscal 2017 revenues totaled $32,406 million compared with $33,347 million in the prior fiscal.

Q4 Segmental Performance

Total net wireless operating revenues were $7,790 million compared with $8,167 million in the year-ago quarter. Postpaid revenues totaled $4,270 million while prepaid revenues were $989 million. Wholesale, affiliate and other revenues were $314 million.

Operating income was $339 million compared with $502 million in the year-ago period. Adjusted EBITDA was $2,816 million compared with $2,654 million in the year-ago quarter. Adjusted EBITDA margin improved to 50.5% from 46.2% in the prior-year quarter.

Net operating wireline revenues were $344 million compared with $480 million a year ago. Operating loss for the segment was $107 million compared with a loss of $26 million in the year-ago period. Adjusted EBITDA was a negative of $48 million against $29 million in the year-ago quarter. Adjusted EBITDA margin was a negative 14% compared with 6% in the prior-year quarter.

Operating Metrics

Total net operating expenses declined to $7,847 million from $8,069 million in the year-ago quarter.

Operating income for the reported quarter was $236 million compared with $470 million in the year-ago period. Despite lower operating expenses, operating income declined due to lower revenues. Fiscal 2017 operating income was $2,727 million compared with $1,764 million in the fiscal 2016.   

Overall adjusted EBITDA was $2,768 million compared with $2,680 million in the year-ago quarter while adjusted EBITDA margin improved to 47.2% from 43.8%. 

Cash Flow

For fourth-quarter fiscal 2017, Sprint’s net cash provided by operations was 2,653 million against cash utilization of $523 million in the prior-year quarter, bringing the respective tallies for fiscal 2017 and 2016 to $10,062 million and $3,290 million.

Adjusted quarterly free cash flow was a negative of $240 million against $80 million in the year-ago quarter.

Liquidity

As on Mar 31, 2018, Sprint had $6,610 million of cash and cash equivalents compared with $2,870 million at the year-ago period. Long-term debt, financing and capital lease obligations were $37,463 million compared with $35,878 million as on Mar 31, 2017.

Guidance

Sprint expects fiscal 2018 adjusted EBITDA between $11.3 billion and $11.8 billion, owing to stabilizing service revenues and continued focus on improving cost structure. Cash capital expenditures, excluding leased devices, are projected in the range of $5 billion to $6 billion, as Sprint will deploy next-gen network and prepaid for 5G in the first half of 2019. It expects differentiation on leased devices in fiscal 2018 to be between 4.2 billion and 4.5 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to four lower.

Sprint Corporation Price and Consensus

VGM Scores

Currently, the stock has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Based on our scores, the stock is more suitable for value and growth investors than momentum investors.

Outlook

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




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