On Jan 3, 2015, Zacks Investment Research downgraded leading wireless carrier in the U.S., Sprint Corp. (S), by a notch to a Zacks Rank #5 (Strong Sell).
After registering positive earnings surprises of 125%, 33.33% and 28.12% in three quarters last year, Sprint ended the year with an average negative earnings surprise of 2.17%. This has hurt investors’ sentiment and the analysts covering the stock are wary about the stock’s future performance.
On Nov 4, 2014, the company reported second-quarter fiscal 2014 loss per share of 19 cents that was wider than the Zacks Consensus Estimate by 280%. Meanwhile, over the last 60 days, the Zack Consensus Estimate for the current year increased 387.5% to a loss of 46 cents. For the first quarter as well, estimates surged 380% to stand at a loss of 30 cents.
In the second quarter, Sprint reported a loss of 272,000 postpaid subscribers. This is a major concern for the company as three of its major competitors, namely, Verizon Communications Inc. (VZ), AT&T, Inc. (T) and T-Mobile US (TMUS) gained a substantial number of postpaid subscribers over the same period. Also, Sprint’s quarterly total retail pre-paid and postpaid subscribers churn rate deteriorated as it lost several of its high-end users to rivals.
Recently, Federal Communications Commission levied a $105 million charge on Sprint for unauthorized billing.
Hence, we believe that persistent subscriber loss owing to intensifying competition along with the unauthorized billing charges are likely to impact subscriber growth at the company further.
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