Market Overview

AT&T and Sprint: Wireless Carriers Exult in Q1 Earnings


With earnings reports flooding research firms left and right today, those that draw special attention are to be celebrated more than usual. Two such companies that reported better-than-expected earnings were wireless competitors Sprint Nextel (NYSE: S) and AT&T (NYSE: T). Both carriers have stunned and thrilled analysts across the board, prompting price target changes, estimate increases and positive commentary regarding the future.

Based on solid margins and a successful first quarter, AT&T is now poised for accelerated YoY post-paid ARPU growth throughout 2012, with U-verse driving much of the revenue. The telecommunications company reported in-line 1Q12 revenues yesterday, with EBITDA ahead of most estimates. The news has encouraged several investors and firms, as the report showed momentum building behind T's 300M share buyback program.

According to Morgan Stanley, the firm is now reinvigorated on AT&T stock, as it increased 2012 EPS from $2.36 to $2.42 and increased 2012 postpaid net adds to 1,190k on better postpaid churn of 1.12%. Deutsche Bank followed suite by not only increasing its estimates on the telecom service, but raising its PT on the company as well.

Praise-worthy earnings also were reported by Sprint, with weaker adds but better EBITDA. Revenue reached $8.73B due to better performance in wireless and lowered Vision expenses. With numbers that beat many predictions, it is no wonder that firms like Citi see a bright future ahead for Sprint.

"We expect Sprint shares to trade higher, as we believe 1Q results displayed solid operational performance that support its current 2012 guidance for revenue & OIBDA, including the likely ramp in Vision expenses throughout the year, and also show positive progress towards meeting its network modernization goals for 2012," Citi said in a research report this morning.

Oppenheimer added that patient investors with a niche for looking at the big picture will likely see very high upside for the stock over the next two to three years, given Sprint's savings and pricing.

The positivity surrounding S at the moment follows a tumultuous decision to hold off on providing Apple (NASDAQ: AAPL) products. Sprint was late to jump on the iPhone bandwagon, and has taken on heavy annual postpaid subscriber losses as a result. However, the company is now seeing encouraging results stemming from the $15.5B iPhone contract it signed and is bouncing back while paying off debts.

Across the spectrum, wireless providers are upping earnings while responsibly keeping debts and buybacks in check. Operating with a well-thought out plan for the future will continue to be profitable for both Sprint and AT&T, as long as each company continues to execute what management has recently projected.

AT&T is currently trading at $31.80, up +5.09% YTD, while Sprint is trading at $2.47, up +5.56% YTD.

Posted-In: Analyst Color Earnings News Retail Sales Topics Analyst Ratings Tech General Best of Benzinga


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