The Zacks Analyst Blog Highlights: Alkermes plc, Elan Corporation, Sprint, AT&T and Verizon

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Nov 16, 2011, 09:30 ET

CHICAGO, Nov. 16, 2011 /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 include Alkermes plc (Nasdaq: ALKS), Elan Corporation (NYSE: ELN), Sprint (NYSE: S), AT&T (NYSE: T) and Verizon (NYSE: VZ).

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Here are highlights from Tuesday's Analyst Blog:

Alkermes Cut to Neutral

We recently downgraded Alkermes plc (Nasdaq: ALKS) to Neutral from Outperform following the average results delivered by the company in the second quarter of fiscal 2012.

Alkermes suffered a loss of $0.07 per share (excluding merger related costs and amortization of acquired intangible assets) in the second quarter. The Zacks Consensus loss estimate was $0.10 per share.

The results of the second quarter of fiscal 2012 included 14 days results of Elan Corporation's (NYSE: ELN) drug delivery unit, Elan Drug Technologies (EDT). We remind investors that Alkermes completed the acquisition of the EDT unit on September 16, 2011.

Total revenues for the second quarter of fiscal 2012 climbed 46.3% to $72.0 million. Revenues in the reported quarter were boosted by the presence of $9.1 million from the EDT unit, which were absent in the second quarter of fiscal 2011. Revenues surpassed the Zacks Consensus Estimate of $64 million.

We note that the merger with Elan's EDT unit has strengthened Alkermes' product portfolio as well as its pipeline. The deal should boost Alkermes' top line significantly. Revenues for fiscal 2012 are projected in the range of $350 - $380 million as opposed to the earlier projection of $205 - $229 million given by the standalone unit. The additional revenue is expected to come from the EDT unit.

Revenues should also benefit from Alkermes' multi-year, multi-million dollar manufacturing deal with one of the top ten pharmaceutical companies across the globe. The deal, signed immediately after Alkermes commenced operations at its new headquarters in Dublin, Ireland, requires Alkermes to manufacture the client company's finished pharmaceutical product, at the Athlone, Ireland facility. Meanwhile, management expects that it will be able to enter the European market and gradually expand operations across the globe by having its headquarters in Ireland.

However, we believe that it will take some time for the newly formed entity to start delivering. We prefer to remain on the sidelines till then and hence revert to a Neutral stance on Alkermes.

Sprint Announces Holiday Discounts

Looking ahead at the Christmas and holiday season, Sprint (NYSE: S) has announced discounted offering on wireless Broadband services. The company will now charge $50 a month for 6 gigabytes (GB) compared to its previous offer (launched in November 1) of $60 a month for 5 GB.

The discounted offer does not cover smartphone users but counts data downloads on tablets, mobile hotspots and laptops. The strategic decision to cut wireless data prices will help Sprint garner market traction as well as compete head to head with market Czars like AT&T (NYSE: T) and Verizon (NYSE: VZ) as both offer $50 per month for 5 GB. Additionally, Sprint's new offer is aimed at wooing more customers and driving revenues during the peak holiday season.

Sprint will also charge less for using extensive data services. It now offers an $80 per month plan for 12 GB compared to its previous plan of $90 for 10 GB. This new plan could give tight competition to Verizon's $80 a month for 10 GB data plan.

Sprint has been charging the highest for its entire data plan historically and is now looking forward to re-pricing its offering to control further subscriber erosion on its network. Further, it also aims to emerge as one of the most customer oriented service providers in the market and increase its exposure to penny-wise end users.

Further, the company is progressing well on the Network Vision plan, which it announced last December.

We believe Sprint's varied data plan offering coupled by its rich collection of smartphones including 4G, tablets and hotspots will remain a long-term margin driver and bode well for its earnings.

We are currently maintaining our long-term Neutral recommendation on Sprint. For the short term, the stock retains a Zacks #3 (Hold) Rank.

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