Q1 Preview: Lower Upgrades/Churn Should Benefit Sprint (S)

Shares of Sprint Nextel Corp. (NYSE: S) are pushing lower Wednesday ahead of the company's first-quarter earnings release, expected out before the market opens Thursday. The stock is down about 0.21% in afternoon trade.

Analysts are currently looking for Sprint to report a loss of $0.22 per share on revenue of $8.19 billion. Last quarter, the Overland Park, Kansas-based communications company posted a loss of $0.31 per share on sales of $8.3 billion. For the same quarter last year, Sprint issued a loss of $0.17 per share on revs of $8.09 billion.

Shares gained 2.9 percent through the quarter and are up 3 percent since.

Data from Bloomberg has 12 analysts with a Buy on Sprint, 16 with a Hold, and five suggesting to Sell. The analyst price target average is $5, with a high of $8 and low of $3. Shares have traded in a range of $5.31 - $3.70 over the last 52-weeks.

Analyst Summary

• Deutsche Bank is looking for a loss of $0.19 on revs of $8.154 billion. Sees ARPU of $55.12 post-paid and $27.50 prepaid, with total net adds of 600K. Deustche is modeling for post-paid sub losses of 50K, narrower than the consensus of a loss of 75K. Deutsche notes the increase in ARPU stem from demand for 4G, increased prices for smartphones, and improved customer satisfaction.
  
  
• Collins Stewart believes Sprint will see pressure from the HTC Thunderbolt and Apple (Nasdaq: AAPL) iPhone. Collins sees a loss of $0.22 per share with revs of $7.954 billion. Post-paid ARPU should be $55.00, with 1.88 percent of churn, while prepaid ARPU is expected to be $26.58 with 5.2 percent of churn. Collins sees total net adds of 413K. The firm sees continue strong growth in prepaid driven by Boost, Virgin Mobile, and Assurance brands.
  
  
• Kaufman Bros. is looking for a pro forma loss of $0.23 with revs of $8.167 billion. Post-paid ARPU should be $47.63 with churn of 1.8 percent. Pre-paid is looking at ARPU of $27.50 with churn of 5.1 percent, according to Kaufman. Net adds in the quarter should be 370K.
  
  "We are currently anticipating good results from Sprint for the quarter with positive post-paid wireless net additions, in contrast to most Street forecasts of a negative net additions quarter. The potential deal between AT&T and T-Mobile is unlikely to materially change our view on Sprint and we believe subscriber metrics are likely to continue improving in the coming quarters, with improvements from higher data pricing likely to help in the back half of the year."
  
  
• Citadel sees a loss of $0.19 per share with revs of $8.195 billion. Post-paid ARPU should be $55.7 with 1.8 percent of churn. Prepaid APRU expected to be $27.1 with 5 percent of churn. Net adds will be about 250K.
  
  "The key driver of our bullish view on EBITDA is our belief that wireless equipment subsidy expense will fall from recent high levels, driven by a lower rate of upgrades within Sprint’s postpaid subscriber base. Sprint’s upgrade rate has been elevated for the past two years, even as its churn rate has remained relatively high. We believe the upgrade rate is likely to have declined in 1Q11 – we estimate 8.5% of postpaid subscribers upgraded, compared to 10% in 4Q10."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of the release.

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