Sprint Corp. (NYSE: FON) met expectations for the fourth quarter Thursday but said its first-quarter results would miss consensus estimates as its long distance revenue continues to drop.
Sprint said on a conference call with analysts that it expects its first-quarter profits would be in the upper 30-cents-a-share range. That's below First Call's current consensus expectation of 44 cents a share. It also said that for the year, results would be at the low end of previous guidance of $1.65 to $1.75 a share. First Call had expected around $1.66 a share. Sprint also said investments in Brazil could cut annual results by another 8 cents a share.
For the fourth quarter, the company's core FON Group reported net income of 41 cents a share for the quarter, just ahead of First Call's consensus estimate of 39 cents a share. But operating profits fell 18 percent as competition and falling prices in long distance countered strong growth in the company's data and wireless services.
Shares in the long-distance telephone company were off $0.02 to $24.78 Wednesday morning. The company was expected to suffer as it struggles to transition to data and wireless, along with AT&T (NYSE: T)and Worldcom (Nasdaq: WCOM).
"2000 was a roller-coaster ride for Sprint and the industry," said CFO Arthur Krause on a conference call Thursday. Economic troubles and softening long-distance revenues brought the company down faster than it could transition to higher-growth revenue streams. "We still have a lot of work to do," said Krause.
The company's core FON Group saw operating income decline amid flat revenue. Operating income fell to $598 million from $731 million a year ago, an 18 percent decline. For the year, operating income fell 3 percent to $2.83 billion.
Fourth quarter revenue of $4.39 billion was down slightly from $4.42 billion in 1999's fourth quarter. For the year, revenues grew 3 percent to $17.69 billion.
Operating cash flow in the quarter was $1.20 billion, down 8 percent from $1.29 billion in the fourth quarter a year ago. For the year, operating cash flow was $5.10 billion compared to $5.06 billion in 1999.
Income from continuing operations was $359 million in the fourth quarter, a decline of 14 percent from $417 million a year ago. Income from continuing operations for the year decreased 5 percent to $1.61 billion from $1.70 billion in 1999.
Sprint PCS (NYSE: PCS) was the quarter's bright spot. The company reaffirmed its outlook for 2001, but said it remained cautious because of a slowing economy. EBITDA (earnings before interest, taxes, despreciation and amortization) should be in the $225 million to $250 million range for the first quarter, and the division should attain break-even on earnings for the year, officials said.
PCS revenues increased 84 percent to $1.94 billion in the fourth quarter compared to $1.06 billion a year ago. Annual revenues rose 88 percent to $6.34 billion from $3.37 billion in 1999. Net loss was on target with First Call's expected loss of 53 cents a share
Operating cash flow was positive for the third consecutive quarter -- bringing in $21 million for the quarter compared to a loss of $501 million in 1999's fourth quarter. For the year, operating cash flow was a loss of $27 million compared to a loss of $1.71 billion a year ago.
Subscriber growth was also strong, with growth up 19 percent over the fourth quarter of 1999. The PCS Group also ended the year with 70 percent more subscribers than a year ago.
The company's soft spot, long distance, saw operating income down 17 percent in the quarter due to pricing pressures, while call volumes increased.
Operating income was $342 million, down 17 percent from $413 million a year ago. Annual operating income was $1.57 billion in 2000 compared to $1.58 billion in 1999. Long distance calling volumes rose 18 percent for the quarter and 18 percent for the year.
Sprint continued broadband expansion during the quarter, having installed DSL equipment in more than 950 central offices in 31 markets. By the end of 2001, DSL will be in more than 2000 central offices in 86 markets, which will enable the company to reach 18 million households and 3 million business locations across the country, the company said.
Among other Sprint units:
Revenue for the global markets was down to $2.57 billion compared to $2.61 billion a year ago. In 2000, revenues were $10.53 billion compared to $10.31 billion in 1999. Sprint said pricing pressures in the long distance voice segment, declines in higher margin services revenues and wireless replacement were to blame.
Operating income declined 66 percent to $92 million, from $267 million a year ago. Sprint said long distance as well as dilution from Sprint ION(SM) and broadband fixed wireless activities brought income figures down.