Sprint Corporation (NYSE: S) is a communications company that offers both wireless and wireline products and services to consumers, businesses, government subscribers, and resellers. The company provides its services through a series of wireless networks, an all-digital global wireline network, and a Tier 1 internet backbone.
The company’s service area includes all 50 states, Puerto Rico, and the U.S. Virgin Islands. Wireless and wireline services are offered under a variety of brand names including Sprint, Boost Mobile, Virgin Mobile, and Assurance Wireless.
In July 2013, Sprint was merged with SoftBank, which owns approximately 83 percent of Sprint’s outstanding common stock. The company is headquartered in Overland Park, Kansas.
Products and Services
As noted above, Sprint operates in two reportable segments: Wireless and Wireline.
Sprint offers both postpaid and prepaid wireless plans to retail subscribers. The company also sells wireless service on a wholesale basis to other carriers (mobile virtual network operators or MVNOs) who provide it under their respective brands.
Postpaid plans generally consist of unlimited talk, text, and a monthly data allowance. Users may either (i) sign a service contract and receive a subsidized phone with a higher monthly rate, (ii) purchase a phone using installment plans and receive a lower monthly rate, or (iii) lease a phone for a specified term and receive a lower monthly rate.
Sprint’s prepaid portfolio consists of multiple brands that are designed to appeal to different demographics. Sprint prepaid is primarily a complementary offering to Sprint postpaid plans, while Boost Mobile is marketed to subscribers that require unlimited data. Virgin Mobile serves subscribers that are looking to optimize spending with high-speed data options. Assurance Wireless provides free phones and basic service to subscribers that meet the requirements of the government-sponsored Lifeline Program.
As noted above, the company’s wholesale business serves MVNOs that offer low-cost wireless service using the Sprint network infrastructure. Carriers include Ting, Republic Wireless, and FreedomPop.
In addition to wireless, the company provides an array of wireline voice and data communication services to other communications companies and certain business subscribers. These services are delivered using a variety of protocols including multiprotocol label switching, IP managed network services, voice over internet protocol, session initiated protocol, and traditional voice services. The wireline network is also carrying an increasing amount of voice and data traffic for the wireless segment as a result of growing usage by wireless subscribers.
First Quarter Earnings Review
Revenue for the quarter ended June 30, 2017, increased two percent from the same period one year ago to $8.2 billion. This was driven by strong revenue from equipment, which was partially offset by lower revenue from services. However, we note that revenue fell four percent from the prior quarter.
The company posted an eighth consecutive quarter of net postpaid phone subscriber growth with 88,000, although this was lower than many analyst estimates. Average revenue per user (ARPU) fell eight percent year-over-year but was roughly flat sequentially.
Operating expenses decreased nine percent year-over-year to $7.0 billion. This was driven by the company’s cost reduction program that delivered nearly $370 million in savings year-over-year related to cost of service and sales, general, and administrative expenses. This helped to deliver the company’s highest adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in nearly 10 years of $2.9 billion, yielding an adjusted EBITDA margin of 47 percent. These cost savings also helped Sprint deliver positive net income of $206 million ($0.05 per share) for the first time in three years.
Cash from operations more than doubled year-over-year to $1.3 billion and was roughly flat sequentially. The company also reported adjusted free cash flow of $239 million, down from $466 million in the same period one year ago.
At June 30, 2017, Sprint listed $8.3 billion in cash and short-term investments, and net debt of $32.6 billion. Stockholders’ equity totaled $18.8 billion, yielding a net debt / equity ratio of 1.7.
Full-Year Earnings Guidance
Encouraged by the ongoing returns from its cost-reduction program, Sprint increased the low end of its full-year adjusted EBITDA guidance by $100 million, resulting in a range of $10.8 billion to $11.2 billion. Operating income was also increased to a range of $2.1 billion to $2.5 billion. Cash capital expenditure expectations remained unchanged at $3.5 billion to $4 billion.
Sprint CEO Marcelo Claure stated on the company’s recent earnings call that he hopes to announce an acquisition soon. He noted that the potential to create value for shareholders would be significantly greater with some sort of horizontal or vertical integration. Potential partners include Charter Communications, DISH Network, T-Mobile, or a mobile virtual network operator (MVNO). There is also the possibility of SoftBank buying out the remaining portion of Sprint that it doesn’t already own. Many of these are unlikely due to leverage constraints (Charter) or antitrust concerns (T-Mobile), but SoftBank has pursued deals aggressively in the past.
- Changes in net subscriber additions;
- Changes in ARPU and profitability;
- Progress in monetizing the company’s unused spectrum; and
- M&A activity.
- The wireless industry is extremely competitive and the company is under constant pressure to add subscribers;
- The company is highly levered, and restrictive debt covenants could negatively impact the company’s ability to access additional financing;
- The company is highly susceptible to general economic conditions; and
- The company’s share price has been volatile and susceptible to speculation regarding potential transactions.
As of August 11, 2017, shares of Sprint closed at $8.31, up more than three percent on the day, yielding a market capitalization of $33 billion. Over the past 12 months, the stock has gained more than 30 percent after trading as low as $5.83 in November 2016. Shares hit a high of $9.65 in January and has been relatively volatile since then.
Following are selected analyst ratings and price targets:
|Matthew Niknam||Deutsche Bank||Hold||$8.00||8/7/2017|
|Philip Cusick||J.P. Morgan||Neutral||$8.00||8/1/2017|
After multiple quarters of losses, Sprint posted a modest yet positive net income. Improved operating expenses helped push adjusted EBITDA higher, and net subscriber growth remained positive. However, the primary catalyst for Sprint remains a combination with a cable operator or an MVNO.
***Get our small and mid cap profiles, special situation and watch alerts in real time. We are now offering our VIP – SMS/text alert service for free, simply text the word “Traders” to the phone number “25827” from your cell phone***
Traders News Source is a wholly owned subsidiary of Traders News Source LLC, herein referred to as TNS LLC.
Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Ivan Neilson, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.
This web site, published by TNS LLC, and is an investment newsletter that is built on the premise of assisting individual investors in learning about investing. Our goal as publishers of financial information is to provide research and analysis of investments to our subscribers. TNS LLC does not give buy or sell recommendations. We do purchase distribution rights from analyst, financial writers and bloggers for a fee that may be licensed to issue price targets and recommendations. Furthermore, we encourage you to speak to a licensed professional prior to making an investment in any type of publicly traded security.
We do sell advertising to other companies including brokerage firms, web sites, publicly traded issuers, investor relations firms, and investment publications, among others. TNS LLC makes no warranty as to the policies of these organizations, and in no way endorses their offers, services, or the content of their advertisements.
When an advertiser is a publicly traded company or a third party acting on behalf of a public company, we fully disclose all compensation in the email advertisement. Such disclosure is included in a disclosure statement in each of the advertisements sent via email.
Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.
PLEASE NOTE WELL: TNS LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.
Release of Liability: Through use of this website viewing or using you agree to hold TNS LLC, its operator’s owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. TNS LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and TNS LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provide herein. Instead TNS LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D.
TNS LLC is compliant with the Can Spam Act of 2003. TNS LLC does not offer such advice or analysis, and TNS LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s investment may be lost or impaired due to the speculative nature of the companies profiled.
The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions & quote; “may”, “could”, or “might” occur.
Understand there is no guarantee past performance will be indicative of future results. In preparing this publication, TNS LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. The advertisements in this website are believed to be reliable, however, TNS LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. TNS LLC is not responsible for any claims made by the companies advertised herein, nor is TNS LLC responsible for any other promotional firm, its program or its structure.