Leap Wireless International Inc. is slated to release its third-quarter 2012 financial results on Wednesday, November 7, before the opening bell. The Zacks Consensus Estimate for the quarter is pegged at a loss of 76 cents, representing an annualized growth of 15.32%.
With respect to earnings surprises, Leap Wireless has underperformed the Zacks Consensus Estimate in three of the last four quarters with an average of negative 10.32%.
Second Quarter Recap
On August 6, Time Warner reported its second-quarter 2012 financial results. GAAP net loss, in the second quarter of 2012, was $41.6 million or a loss of $0.54 per share compared with $65.2 million or $0.85 per share in the prior-year quarter. Quarterly earnings per share of a loss of $0.54 were higher than the Zacks Consensus Estimate of a loss of $0.52.
Quarterly total revenue was $786.8 million, up 3.5% year over year, but well below the Zacks Consensus Estimate of $839 million. In the second quarter of 2012, operating loss was $31.6 million compared with $12.3 million in the prior-year quarter. Quarterly adjusted OIBDA was $190.8 million, up 18.8% year over year.
Agreement of Estimate Revisions
In the last 30 days, out of the total 19 estimates, three were revised upward while two moved in the opposite direction for the third quarter of 2012. However, for the fourth quarter of 2012, out of the total 18 estimates, only one upward revision was witnessed, while three moved downward over the same time frame.
For 2012, out of the total 18 estimates, two were revised upward while three witnessed downward revisions, over the past one month. The upward estimate revision continues for 2013, where out of the 19 estimates, four were revised upward, while one moved in the opposite direction over the same period.
Magnitude of Estimate Revisions
Over the last 30 days, the current Zacks Consensus Estimate has remained unchanged for the third quarter of 2012 while it decreased by a penny to a loss of $1.22 for the fourth quarter of 2012. Alike the fourth quarter, the current Zacks Consensus Estimate also fell by a penny for 2012 over the last 30 days, while the estimate decreased by 4 cents to $3.07 for 2013 over the same time frame.
Leap Wireless remains one of the low-cost prepaid wireless service providers in the U.S, and offers a range of cheap service plans including its popular Muve Music service thus enabling the company to attract young customers. The company is focusing on upgrading its existing customers by selling Android-based smartphones, which in turn, will not only drive the company’s top-line sales but also contribute to customer retention as well as customer additions.
However, the major concern for Leap Wireless is the growing competition in the U.S. low-cost prepaid wireless phone market. Traditionally, the company competes with the likes of MetroPCS Communications Inc. , Boost Mobile, the prepaid subsidiary of Sprint Nextel Corp. (S - Analyst Report) and Tracfone – the prepaid subsidiary of America Movil S.A.B. (AMX - Analyst Report) . Recently, the two largest nationwide carriers, viz., Verizon Communications Inc. (VZ - Analyst Report) and AT&T Inc. (T - Analyst Report) entered the wireless prepaid phone market after the growth rate of lucrative postpaid wireless market subdued.
We maintain our long-term Neutral recommendation on Leap Wireless International Inc. . Currently, the company retains a Zacks #3 Rank, implying a short-term Hold rating.