Sprint Shares Jump 16%; MetroPCS 27% On Q2 Reports
By REINHARDT KRAUSE, INVESTOR'S BUSINESS DAILY
Posted 10:53 AM ET
Shares of Sprint Nextel (S) jumped 16% in early trading Thursday after the No. 3 wireless services provider reported a wider-than-expected Q2 loss but forecast higher free cash flow after it shuts down its older, Nextel-legacy iDEN cellphone network.
Shares of MetroPCS Communications (PCS) also jumped in early trading on Thursday, up 27%. The wireless firm early Thursday said Q2 earnings minus items rose 78% to 41 cents.
Sprint early Thursday said its results where boosted by sales of nearly 1.5 million iPhones in the quarter, ahead of views.
AT&T (T) on Tuesday said it sold 3.7 million iPhones while Verizon Wireless, owned by Verizon Communications (VZ) and Vodafone (VOD), sold 2.7 million iPhones. Apple (AAPL) is expected to roll out its next iPhone, possibly called the iPhone 5, by October.
Sprint's "iPhone investment is paying off as (customer) churn falls sharply and average revenue per subscriber accelerates," said Macquarie Capital analyst Kevin Smithen in a report.
Sprint has agreed to pay Apple more than $15 billion over several years.
"With nearly 1.5 million iPhones sold, above our 1.3 million estimate, Sprint posted flat sequential iPhone sales and is gaining market share in the profitable iPhone segment," Smithen wrote. "This should bode well for future ARPU expansion and churn reduction. Sprint had 40% of iPhone sales to new subscribers vs. just 22% at AT&T, implying that Sprint's unlimited offerings are paying off in market share gains."
Sprint plans to stick with its unlimited data service plans when Apple introduces the iPhone 5, as IBD reported.
Overland Park, Kan.-based Sprint has seen its shares rise more than 50% since June 1, though it still trades under 4.
Sprint's stock has underperformed for years. But some analysts say that it's now better funded and that its turnaround plan is finally clicking.
"Sprint reported a significant (Q2) margin beat, helped in large part by lower customer volumes, but the company is also doing a great job managing expenses," said Oppenheimer analyst Tim Horan in a report. "It has focused its marketing dollars on converting iDEN subscribers to (the CDMA network). For investors with a long-term focus, Sprint's results suggest that margins can see solid expansion over the next three years."
For the quarter, Sprint lost 46 cents a share compared with a 28 cent loss in the year-ago quarter. Revenue rose 5.8% to $8.8 billion. Analysts polled by Thomson Reuters had expected revenue of $8.73 billion.
