Analyst reports: Sprint shares sag on mixed reviews
The company's shares hit a 52-week low after several analysts issue reports on its wireless phone unit.
Westwood, Kan.-based Sprint, the nation's third-largest long-distance phone operator, warned yesterday that third-quarter profit would miss estimates because of soaring maintenance costs.
Sprint expects third-quarter profit excluding its wireless business and non-recurring items to be between 45 cents and 47 cents a share. Analysts were expecting 49 cents per share, according to First Call/Thomson Financial.
At 1 p.m. PT, the close of regular trading, Sprint shares dipped to $25.75, down 4 percent from yesterday's close. Earlier today, shares hit a 52-week low of $24.75.
Sprint, which trades on the New York Stock Exchange under the ticker "FON," also announced yesterday that its wireless division expects fewer customers than anticipated.
Sprint PCS, which trades as a tracking stock with the ticker "PCS," expects to add 800,000 customers in the third quarter, below an earlier forecast of 900,000. The company added 883,000 subscribers in the second quarter.
Sprint PCS' "churn rate," or the number of customers who drop the plan, is expected to increase in the third quarter. PCS defectors are expected to reach nearly 3 percent of total customers, compared with 2.6 percent in the second quarter.
At that rate, analysts said, the company will need to add 1.5 million subscribers in the fourth quarter to meet its current estimate of 4 million subscribers for the year.
Although meeting the forecast will be challenging, Sprint executives said yesterday that holiday gift-givers may help the company meet or exceed the fourth-quarter target for it to remain on track for the year.
Sprint PCS expects third-quarter earnings before interest, taxes, depreciation and amortization to be slightly more than $100 million.
At 1 p.m. PT, the close of regular trading, Sprint PCS shares were down 10 percent to $29.81.
A slew of analysts issued mixed reports on Sprint and Sprint PCS in the wake of yesterday's warnings. Analysts may also be cautious because of AT&T's plans to distribute more tracking shares in its wireless group. Verizon Wireless also plans to sell public stock soon.
WR Hambrecht cut Sprint PCS to "buy." Dresdner Kleinwort Benson analyst Bruce J. Roberts downgraded Sprint to "add" from "buy," slashing his per-share earnings to $1.96 and $2.21 from $2.05 and $2.36, respectively.
Jefferies analyst Frederick Moran maintained his "hold" rating on Sprint PCS but cut his 12-month price target to $45 from $70 per share.
Goldman Sachs raised its estimate on Sprint PCS. Edward Jones raised its rating on Sprint PCS to "strong buy."
UBS Warburg reiterated a "strong buy" rating today. Credit Suisse First Boston analyst Daniel Reingold reiterated his "strong buy" rating yesterday, with a 12-month price target of $52 per share.