CHICAGO, April 29, 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 (NYSE: S), AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), Clearwire Corp. (Nasdaq: CLWR) and Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT).
The third-largest U.S. wireless carrier Sprint Nextel (NYSE: S) reported first quarter 2011 adjusted net loss per share of 15 cents, which surpassed the Zacks Consensus Estimate of a loss of 22 cents. Adjusted net loss narrowed from the year-ago loss of 29 cents.
Despite competitive pressure from its chief rivals AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), Sprint generated solid results, thanks to its cheap service plans, fourth generation (4G) leadership, healthy service and a successful multi-brand strategy.
Consolidated operating revenue grew 3% year over year to $8.3 billion in the reported quarter and was ahead of the Zacks Consensus Estimate of $8.12 billion. Higher revenues were driven by strong post-paid and prepaid average revenue per user (ARPU), healthy prepaid subscriber additions and higher wireless equipment revenues partially offset by lower contributions from its wireline business and post-paid wireless subscribers.
Adjusted OIBDA (operating income/loss before depreciation, amortization, asset impairments and abandonments) rose 2% year over year to $1.5 billion. Higher handset subsidy was offset by strong wireless post-paid and prepaid ARPU.
For fiscal 2011, Sprint Nextel expects post-paid and total net subscriber additions to improve annually. Capital expenditure is expected to be approximately $3 billion. The company is also likely to generate positive free cash flow for the remainder of the year.
The company's 4G WiMax is a major opportunity in the wireless market, which may drive its future revenue. Sprint will continue its prime focus on 4G network that currently covers 71 U.S. markets in 28 states via the Clearwire Corp. (Nasdaq: CLWR) network. However, Sprint is now no longer the only major carrier offering the 4G network and its market advantage has eroded as other carriers started offering competitive services.
Further, we believe Sprint's business has been depressed since the proposed merger of AT&T and Deutsche Telekom's unit T-Mobile USA was announced in late March. The merged AT&T would be almost three times the size of Sprint and might further hurt Sprint's profitabilty and shrink its subscriber base.
On the other hand, Sprint has started gaining ground from this month following new contracts wins, the appointment of the new CFO and resolved wholesale pricing dispute with Clearwire, which was plaguing Sprint's revenue since last year. Last year, Sprint announced a multiyear network initiative, Network Vision, which could be a significant long-term margin driver and is expected to generate $10 billion to $11 billion in savings over the next seven years.
We believe all these factors will serve as a major catalyst to Sprint's growth plan going forward. Hence, we are currently maintaining our long-term Neutral recommendation on Sprint, supported by the Zacks #3 (Hold) Rank.
Starwood Beats Overall
Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) reported first-quarter adjusted earnings from continuing operations of 30 cents, which surpassed the Zacks Consensus Estimate of 26 cents and improved from the year-earlier quarter's earnings of 13 cents. The earnings also topped the company's guidance range of 22 cents to 26 cents.
On a GAAP basis, including loss on asset dispositions and income tax benefit associated with the disposition, Starwood recorded earnings of 15 cents per share compared with 16 cents in the year-ago quarter.
The quarter's better-than-expected earnings were aided by an increase in demand. Revenues jumped 9.1% year over year to $1,295 million in the quarter, with revenue per available room witnessing a considerable growth in the quarter. The quarter's revenue also outperformed the Zacks Consensus Estimate of $1,277 million.
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