CHICAGO, March 8, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includeAeropostale Inc. (NYSE: ARO), Sprint Nextel Corp. (NYSE: S), AT&T Inc.(NYSE: T), Verizon Communications (NYSE: VZ) and Clearwire Corp. (Nasdaq: CLWR).
Here are highlights from Wednesday's Analyst Blog:
Earnings Preview: Aeropostale
Aeropostale Inc. (NYSE: ARO), a retailer of active and casual clothing and accompaniments for youths, is slated to report its fourth-quarter 2011 financial results on March 8, 2012. The current Zacks Consensus Estimate for the quarter stands at 38 cents per share, representing an estimated year-over-year decrease of about 60%. Revenue, as per the Zacks Consensus Estimate, is $809 million.
Agreement of Estimate Revisions
Of the 24 analysts covering the stock, none revised estimates in either direction in the last 30 days. However, for fiscal 2011, one analyst revised an estimate downward.
Magnitude of Estimate Revisions
Estimates haven't budged for Aeropostale over the last 30 days, as the risk-reward ratio remained well balanced for the company.
Analysts are of the opinion that the company has right product mix to lure its target customers, which in turn, will bring in incremental sales. However, the company's increased markdowns and contracting merchandise margins offset the positives.
Mixed Earnings Surprise History
With respect to earnings surprises, Aeropostale has topped as well as missed the Zacks Consensus Estimate over the last four quarters in the range of negative 2.1% to a positive 33.3%. The average remained at positive 14.1%, indicating that the company has surpassed the Zacks Consensus Estimate by the same magnitude in the trailing four quarters.
The company is trying to reposition itself to drive growth by focusing on inventory optimization and cost-containment efforts. Moreover, we believe the company's e-commerce business provides an enormous scope for growth.
Aeropostale teamed up with FiftyOne, the leading provider of international e-commerce services to the U.S. retailers, to launch its global e-commerce site, Aeropostale.com. The move is highly accretive to the company's online sales as it will enable Aeropostale to generate additional sales while broadening its existing customer base throughout the world.
However, we remain on the sidelines as we expect revenue growth to remain muted in the coming quarters in the absence of any near-term catalysts. Further, the company's aggressive inventory offloading stance in order to right-size its inventory coupled with lower average selling price is likely to hurt profit margins.
Currently, Aeropostale retains a Zacks #3 Rank, which implies a short-term (1–3 months) Hold rating.
Sprint, LightSquared Deal in Doubt
The 11-year deal between Sprint Nextel Corp. (NYSE: S) and the privately held LTE provider LightSquared seems to be fading, as GPS spectrum interference issues for the latter are not yet resolved.
Last July, Sprint collaborated with LightSquared to host the latter's spectrum, providing network services and giving LightSquared roaming access to Sprint's 3G network. The deal could lessen the load on Sprint's network as the demand for wireless data is growing rapidly. However, LightSquared has been under the scrutiny of several government agencies due to possible network interference. As a result, Sprint cannot use LightSquared network until it is resolved. While the initial deadline was December 2011, Sprint extended it twice to March 15, 2012.
Now, LightSquared is again expected to fail the deadline for obtaining the approvals. As a result, Sprint will terminate its agreement for building a LTE network with LightSquared.
Facing neck-to-neck competition from AT&T Inc.(NYSE: T), Verizon Communications (NYSE: VZ) and Clearwire Corp. (Nasdaq: CLWR), the loss of Sprint's contract would raise concerns on the viability of LightSquared.
Coming to Sprint, the failure of the deal will not affect the company as it extended its network-sharing deal with Clearwire. The company would use the unlimited WiMax network of Clearwire to support its 4G services over the next two years (i.e. 2012 and 2013).
The third-largest U.S. wireless carrier plans to launch its own LTE networks in the 1.9 GHz band in mid 2012 and expects to complete the deployment by year-end 2013. Initially, LTE services will be deployed in six markets including Atlanta, Baltimore, Dallas, Houston, Kansas City and San Antonio. The LTE coverage is expected to extend to more than 250 million customers by 2013.
Nevertheless, the Clearwire deal raises Sprint's payment commitments that would dilute it free cash flow over the next two years. Sprint, which owns a hefty 54% stake in Clearwire, would pay $926 million over the next two years. In addition, Sprint would also make prepayments of $350 million for LTE capacity, provided Clearwire meets certain build-out targets by June 2013.
We currently maintain our long-term Neutral recommendation on Sprint. For the short term (1–3 months), the stock retains a Zacks #3 (Hold) Rank.
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