The Zacks Analyst Blog Highlights: Sprint Nextel, Apple, AT&T, Verizon Communications and The Hain Celestial Group

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Aug 25, 2011, 09:30 ET

CHICAGO, Aug. 25, 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: Sprint Nextel Corp. (NYSE: S), Apple Inc. (Nasdaq: AAPL) AT&T Inc. (NYSE: T) Verizon Communications (NYSE: VZ) and The Hain Celestial Group Inc. (Nasdaq: HAIN).

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Here are highlights from Wednesday's Analyst Blog:

Sprint to Sell Apple iPhone

The third-largest U.S. wireless carrier Sprint Nextel Corp. (NYSE: S) expects to sell the new version of Apple Inc.'s (Nasdaq: AAPL) iPhone from mid October. Besides, the company will also start selling the existing iPhone 4.

Apart from Sprint, the iPhone 5 will also be marketed by the two other dominant players, AT&T Inc. (NYSE: T) and Verizon Communications (NYSE: VZ), from mid October.

We believe the sale of iPhones would be a big win for Sprint, which is struggling to turn around its business after its disastrous merger with Nextel in 2005. Sprint's share has been eroding continuously in the U.S. wireless market due to its inability to keep pace with its competitors in providing competitive services. The sale of the iPhone has yielded lucrative returns to both AT&T and Verizon, the former marketing it since 2007 while the latter in the fray from February this year.

Sprint has nevertheless revived to a certain extent from subscriber losses and gained from improving customer service. At the end of the second quarter, Sprint had roughly 52 million customers while AT&T and Verizon had 99 million and 106 million subscribers, respectively.

The addition of the iPhone will help Sprint to gain new customers while retaining the old ones. This will lead to increased subscriber growth, reduced churn and higher average revenue per user. The company expects to sell 6 million iPhones this year.

Ironically, the iPhone deal may in a way go against Sprint. The company's deal would improve the chances of AT&T winning approval from regulators to acquire Deutsche Telekom unit, T-Mobile. If the merger is approved, it might significantly alter the structure of the overall telecommunication industry. The wireless industry will be dominated by two strong companies, AT&T and Verizon, that control almost 80% of the U.S. wireless post-paid market. The combined AT&T would be almost three times the size of Sprint further hurting its profitability and shrinking the subscriber base.

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.

Hain Beats, Sustains Growth

The Hain Celestial Group Inc. (Nasdaq: HAIN), which distributes, markets and sells various natural and organic foods as well as personal care products, posted better-than-expected fourth-quarter 2011 financial results.

The quarterly earnings of 35 cents a share beat the Zacks Consensus Estimate of 33 cents, and climbed 40% from 25 cents delivered in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 28 cents compared with 16 cents a share earned in the year-ago quarter.

Guidance

Hain Celestial forecasts revenue between $1.23 billion to $1.26 billion, representing a growth range of 9.0% to 11.0% and earnings in the range of $1.50 to $1.60 per share, reflecting a growth range of 11% to 19% for fiscal 2012.

Why Invest?

Hain Celestial provides the underpinning for an excellent investment through its robust sales and earnings growth. The company registered a growth of 23% in its top line in fiscal 2011 with net income surging 43% over the prior year. Moreover, the company reduced its debt by $58 million during fiscal year 2011.

Hain Celestial's strategic initiatives to enhance its portfolio of global brands by acquiring Danival, the manufacturer of certified organic food products with facilities in France, and GG UniqueFiber, the manufacturer of all natural high fiber crackers in Norway, is paying off well.

Acquisitions have been a key part of Hain Celestial's strategy to build market share. These acquisitions have not only widened the company's geographical presence, but have also provided opportunities to cross-sell products in the U.S., Canadian, and European markets.

Moreover, Hain Celestial has undertaken a number of initiatives to improve its performance and put itself on the growth trajectory. The company's Stock Keeping Unit ("SKU") rationalization program has helped to eliminate SKUs, which had lower sales volume or weak margins. Management focuses on improving profitability through new product introductions and reducing costs.

However, the company faces strong competition in the natural and organic foods market and the personal care products segment. Competition is encountered on several attributes - product quality, brand recognition and loyalty, price, product innovation and promotion. This may dent the company's sales and margins.

Currently, we have a long-term Neutral rating on the stock.

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