Sprint (S) Betters Estimates In Q2 Earnings, Revenues Miss

U.S. national wireless carrier Sprint Corp (NYSE:S) reported mixed financial results in the second quarter of fiscal 2017.

Net Income

Sprint's second-quarter 2017 net loss was $48 million or 1 cent per share compared with a net loss of $142 million or 4 cents in the year-ago quarter. Moreover, second-quarter net loss was 1 cent as against the Zacks Consensus Estimate of a loss of 2 cents. The bottom line rallied 75% on a year-over-year basis.

Sprint Corporation Price, Consensus and EPS Surprise

Sprint Corporation Price, Consensus and EPS Surprise | Sprint Corporation Quote

Revenue

Quarterly total revenues totaled $7,927 million, down 3.9% year over year and were below the Zacks Consensus Estimate of $8,071 million. Service revenues were $5,967 million, down 6.95%. Equipment revenues totaled $1,960 million, increasing 6.87%.

Operating Metrics

Operating expenses were $7,326 million compared with $7,625 million in the year-ago quarter. Operating income was $601 million compared with $622 million in the year-ago period. Adjusted EBITDA was $2,729 million compared with $2,347 million in the year-ago quarter. Adjusted EBITDA margin was 45.7% compared with 36.6% in the prior-year quarter.

Cash Flow

In the second-quarter of 2017, Sprint generated $1,959 million of cash from operations compared with $1,708 million in the prior-year quarter. Quarterly free cash flow was $420 million compared with $707 million in the year-ago quarter.

Liquidity

At the end of Sep 30, Sprint had $4,802 million of cash and marketable securities compared with $2,870 million at the end of March 2017. Total debt outstanding was $34,236 million compared with $35,878 million at the end of March 2017.

Wireless Segment

Total segment revenues were $7,609 million, down 3.08% year over year. Postpaid revenues totaled $4,363 million, down 7.56%. Prepaid revenues were $990 million, declining 4.53%. Wholesale revenues were $296 million, up 13.8%. Equipment revenues totaled $1,960 million, increasing 6.87%.

Operating income was $689 million compared with $654 million in the year-ago period. Adjusted EBITDA was $2,764 million compared with $2,323 million in the year-ago quarter. Adjusted EBITDA margin was 48.9% compared with 38.6% in the prior-year quarter.

Wireline Segment

Segment revenues were $409 million, down 21.5% year over year. Voice revenues totaled $109 million, down 36.6%. Data revenues were $33 million, down 23.3%. Internet revenues were $256 million, declining 11.1%. Other revenues were $11 million, down 38.9% year over year.

Operating income was at a loss of $78 million compared with a loss of $32 million in the year-ago period. Adjusted EBITDA was at a loss of $29 million compared with $23 million in the year-ago quarter. Adjusted EBITDA margin was a negative 7.1% compared with 4.4% in the prior-year quarter.

Subscribers Statistics

In the reported quarter, Sprint witnessed net additions of 3,78,000 wireless customers, including postpaid net gain of 1,68,000, prepaid net additions of 95,000, and wholesale and affiliate net additions of 1,15,000. Sprint's focus on delivering the most attractive value proposition in wireless resulted in 2,79,000 postpaid phone net additions in the quarter, marking the ninth consecutive quarter of net additions.

As of Sep 30, Sprint had 54.027 million wireless connections, up 0.12% year over year. This includes 31.686 million postpaid, 8.765 million prepaid and 13.576 million wholesale customers.

Quarterly total retail postpaid churn rate was 1.72% compared with 1.52% in the year-ago quarter. Total retail prepaid churn rate was 4.83% versus 5.59% in the year-ago quarter. Postpaid phone churn was 1.59% as against 1.37% in the prior-year quarter. Total retail postpaid ARPU (average revenue per user) was $46.00 versus $50.54 in the year-ago quarter. Total retail prepaid ARPU was $37.83 versus $33.15 in the year-ago period.

Fiscal 2017 Outlook

For fiscal 2017, Sprint has maintained its previous outlook. The company expects fiscal 2017 adjusted EBITDA of $10.8 billion to $11.2 billion. Sprint anticipates operating income of $2.1 billion to $2.5 billion. Capital expenditures are projected in the range of $3.5 billion to $4 billion, similar to the previous expectation.

This Zacks Rank #3 (Hold) stock faces fierce competition in the domestic wireless market from Verizon Communications Inc (NYSE:VZ) , AT&T Inc (NYSE:T) and T-Mobile US Inc (NYSE:T) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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