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Sprint (S) Surpasses Earnings and Revenue Estimates in Q1

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Sprint Corporation (S - Free Report) reported healthy first-quarter fiscal 2018 results, wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.  

Net Income

Quarterly net income fell to $176 million or 4 cents per share from $206 million or 5 cents per share in the year-ago quarter, primarily due to higher operating expenses. However, reported earnings beat the Zacks Consensus Estimate by 5 cents.     

Sprint Corporation Price, Consensus and EPS Surprise

Revenues

Total net operating revenues decreased to $8,125 million from $8,157 million in the year-ago quarter due to unstable revenue trends. The top line, however, beat the Zacks Consensus Estimate of $8,044 million. Service revenues were $5,740 million, down from $6,071 million in the year-ago quarter. Equipment sales totaled $1,173 million, down from $1,187 million. Equipment rentals increased to $1,212 million from $899 million.

Segmental Performance

Total net wireless operating revenues were $7,845 million compared with $7,810 million in the year-ago quarter. Postpaid revenues totaled $4,188 million and prepaid revenues were $982 million. Wholesale, affiliate and other revenues were $290 million.

Operating income was $1,002 million compared with $1,178 million in the year-ago period as the company battled intense price wars amid cut-throat competition. Adjusted EBITDA was $3,318 million compared with $2,866 million in the year-ago quarter. Adjusted EBITDA margin improved to 60.8% from 50.1% in the prior-year quarter.

Net operating wireline revenues were $338 million compared with $433 million a year ago. Operating loss for the segment was $96 million compared with a loss of $67 million in the year-ago period. Adjusted EBITDA was a negative of $42 million compared with a negative $11 million in the year-ago quarter. Adjusted EBITDA margin was a negative 12.4% compared with negative 2.5% in the prior-year quarter.

Operating Metrics

Total net operating expenses increased to $7,310 million from $6,994 million in the year-ago quarter. Operating income for the reported quarter was $815 million compared with $1,163 million a year ago due to higher operating expenses.

Overall adjusted EBITDA was $3,280 million compared with $2,853 million in the year-ago quarter and adjusted EBITDA margin improved to 57.1% from 47%.  

Cash Flow

For first-quarter fiscal 2018, Sprint’s net cash provided by operations was 2,430 million compared with $1,924 million in the prior-year quarter.

Adjusted quarterly free cash flow was $8 million compared with $368 million in the year-ago quarter.

Liquidity

As of Jun 30, 2018, Sprint had $4,378 million of cash and cash equivalents with long-term debt, financing and capital lease obligations of $35,771 million.

Fiscal 2018 Guidance

Sprint has increased its adjusted EBITDA estimates on a reported basis to a range of $12 billion to $12.5 billion up from the previous guidance of $11.6 billion to $12.1 billion, due to impacts of the new revenue recognition standard.

Excluding the impact of the new revenue recognition standard, it expects fiscal 2018 adjusted EBITDA between $11.3 billion and $11.8 billion.

Cash capital expenditures, excluding leased devices, are projected in the range of $5 billion to $6 billion.

Zacks Rank & Stocks to Consider

Sprint currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include Comtech Telecommunications Corp. (CMTL - Free Report) , Micron Technology, Inc. (MU - Free Report) and Motorola Solutions, Inc. (MSI - Free Report) . While Comtech and Micron sport a Zacks Rank #1 (Strong Buy), Motorola carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comtech has a long-term earnings growth expectation of 5%. It beat earnings estimates in each of the trailing four quarters, the average being 123.7%.          

Micron has a long-term earnings growth expectation of 8.2%. It beat earnings estimates in each of the trailing four quarters, the average being 5.9%.   

Motorola has a long-term earnings growth expectation of 8.5%. It beat earnings estimates in each of the trailing four quarters, the average being 12.1%.   

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