Sprint Corporation S is slated to release its fourth-quarter fiscal 2014 results on May 5, before the opening bell.
Last quarter, the company’s loss was narrower than the Zacks Consensus Estimate of loss, which led to a positive earnings surprise of 21.74%. Meanwhile, the trailing four-quarter average earnings surprise stands at a negative of 24.98%. Let’s see how things are shaping up for this announcement.
Factors Likely to Influence This Quarter
We believe the company’s focus on subscriber and revenue growth at the core Sprint platform, through the deployment of its multi-billion dollar restructuring program – Network Vision, is enhancing wireless growth prospects.
Last month, the company launched its new International Value Roaming plan which promises free unlimited international data roaming at up to 2G speeds in 15 selected countries. Sprint aims to lure more customers by mitigating their agony of paying huge data roaming bills. We believe the new plan should help the company reverse customer churn and evade a further plunge in position among the major wireless carriers in the U.S.
Moreover, Sprint is set to boost its 2.5 GHz network coverage. The company has sealed a $1.8 billion financing deal with three new vendors and has received another $300 million in credit from its existing Canadian financer.
Meanwhile, high spending and decline in postpaid customer base might hamper the company’s profitability. Also, aggressive pricing competition is compelling the company to invest in higher promotional activities, which may weigh on the quarter’s performance.
Earnings Whispers
Our proven model does not conclusively show that Sprint is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below:
Zacks ESP: Sprint has an earnings ESP of -25.00%. This is because the Most Accurate estimate stands at a loss of 5 cents while the Zacks Consensus Estimate is pegged at a loss of 4 cents.
Zacks Rank: Sprint has a Zacks Rank #3 which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.
On the other hand, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may consider instead, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Cincinnati Bell Inc. CBB, with an earnings ESP of +80.00% and a Zacks Rank #3.
Cogent Communications Holdings, Inc. CCOI, with an earnings ESP of +33.33% and a Zacks Rank #3.
Telecom Argentina S.A. TEO, with an earnings ESP of +3.57% and carries a Zacks Rank #3.
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