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Here’s Why You Should Add Sprint (S) to Your Portfolio


On Oct 10, U.S. national wireless carrier Sprint Corp S was upgraded by a notch to a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Catalysts Behind the Upsurge

Sprint remains on track with network modernization and integration efforts, to fortify its position in the wireless industry. Sprint is also known for its unlimited offerings, which are a counteractive competitive measure against rival carriers.

We believe these offerings have helped Sprint register an impressive number of customer additions during the first quarter of fiscal 2017. In the reported quarter, Sprint witnessed net additions of 61,000 wireless customers, including prepaid net additions of 35,000, wholesale and affiliate net additions of 65,000. The company lost 39,000 net postpaid customers. Sprint's focus on delivering the most attractive value proposition in wireless resulted in 88,000 postpaid phone net additions in the quarter, marking the eighth consecutive quarter of net additions. As of Jun 30, 2017, Sprint had 53,698 million wireless connections, up 0.63% year over year. Backed by such subscriber gain, Sprint has raised its outlook for full-year 2017.

Meanwhile, Sprint’s wholly-owned prepaid subsidiary, Virgin Mobile USA, has extended the unlimited service offer to existing iPhone owners who are switching over to the carrier. Earlier, Virgin Mobile USA inked a deal with Apple to relaunch itself as an exclusive iPhone carrier.

In August 2017, the company unveiled its Sprint MultiLine, an enterprise-grade solution within its Bring Your Own Device (BYOD) portfolio. Sprint MultiLine delivers a solution that allows businesses to add a company-owned number to their employees' personal phones for calling and texting on any mobile device and any underlying carrier. This will aid large enterprises as well as small and medium size businesses (SMB) to overcome challenges in the ever-growing BYOD environment.

We also look forward to Sprint’s alliance with telecom service provider, Ericsson ERIC to launch massive MIMO (multiple input, multiple output) radios. In September, Sprint carried out field tests of 2.5 GHz Massive MIMO using Sprint’s spectrum and Ericsson’s 64T64R (64 transmit, 64 receive) radios, in Seattle, WA and Plano, TX. The trial demonstrated capacity surge of about four times compared with an 8T8R antenna. Notably, both the companies are planning to launch Massive MIMO radios across the United States by 2018. These devices are expected to raise the network capacity of Sprint by up to 10 times and will also influence Gigabit LTE services, thus aiding the company’s 5G networks.

The company further tried to save costs by relocating its mobile towers from the expensive space leased from Crown Castle International Corp CCI and American Tower Corporation AMT to the lesser expensive plots on government-owned properties.

Hiked Guidance

For full-year 2017, Sprint has raised its outlook. The company expects fiscal 2017 adjusted EBITDA of $10.8-$11.2 billion compared with the previous expectation of $10.7-$11.2 billion. Sprint anticipates operating income of $2.1-$2.5 billion versus the previous expectation of $2-$2.5 billion. Capital expenditures will be approximately $3.5-$4 billion, which is similar to the previous expectation.

Positive Earnings Surprise

Sprint delivered a positive earnings surprise of 600% in the last reported first quarter of 2017 result (ended Jun 30). Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, with an average beat of 129.47%.

Estimates Trending Up

We note that the Earnings Per Share (EPS) estimate for Sprint has climbed for the remaining quarters of 2017 and also for full-year 2017.

The EPS growth for the third quarter of 2017 and the fourth quarter of 2017 is estimated to accelerate 43.8% and 57.8%, respectively. For fiscal 2017, EPS is expected to soar 89.1%.

The upward estimate revisions reflect optimism over prospects of this stock.

Favorable Style Score

Growth investors look for stocks with aggressive earnings or revenue growth potential, which propel share price. Our research shows that stocks with a Growth Style Score of A or B when combined with a Zacks Rank #1 or 2 offer the best opportunities in the growth investing space.

Notably, the stock has an attractive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Price Performance

However, the price performance has been impressive. Over the past year, shares of Sprint have soared 5.2% as against the industry’s decline of 0.8%.

When compared with the market at large, the stock’s performance looks dismal, as the S&P 500 index has rallied 18.4%, over the same time span.

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