The Zacks Analyst Blog Highlights: Sprint, T-Mobile U.S., Dish Network, Verizon Communications and CNO Financial Group

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Dec 27, 2013, 09:30 ET

CHICAGO, Dec. 27, 2013 /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 the Sprint Corp. (NYSE:S-Free Report), T-Mobile U.S. (NYSE:TMUS-Free Report), Dish Network Corp. (Nasdaq:DISH-Free Report), Verizon Communications Inc. (NYSE:VZ-Free Report) and CNO Financial Group Inc. (NYSE:CNO-Free Report).

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Here are highlights from Thursday's Analyst Blog:

SoftBank Vies for T-Mobile

SoftBank's hankering for the U.S. telecom sector is no secret. After acquiring Sprint Corp. (NYSE:S-Free Report) in Jul 2013, the Japanese telecom carrier is now eyeing T-Mobile U.S. (NYSE:TMUS-Free Report) for around $20 billion.

SoftBank, which wants Sprint to hold the majority of T-Mobile U.S., is currently in the final stage of negotiation with Deutsche Telekom AG, the parent company of T-Mobile U.S. Initially, the Japanese operator was looking for a stock swap agreement, but has now added a tender offer to its list and is believed to be in talks with leading banks to fund the deal.

In July, SoftBank acquired a 78% stake in Sprint for $21.6 billion after getting shareholders' nod and clearing competition-related concerns of the U.S. Federal Communications Commission (FCC). Notably, SoftBank thwarted Dish Network Corp.'s (Nasdaq:DISH-Free Report) attempt to acquire Sprint by raising its earlier bid of $20.1 billion.

If successful, the transaction with T-Mobile U.S. will offer fruitful synergies for SoftBank. Amalgamation of the two carriers will lead to over 100 million customers and place SoftBank in a much stronger position as opposed to major carriers such as Verizon Communications Inc. (NYSE:VZ-Free Report) and AT&T Inc. The new entity will also be the second largest carrier in the world in terms of revenues, surpassing global giant Vodafone. It will also give the Japanese carrier a shot in the arm, with a solid foothold in the largest economy in the world.

However, a number of reasons force us to remain more sceptical than optimistic about the success of the deal. SoftBank may have to compete with Dish Network Corp, as this second largest U.S. satellite TV provider is also considering a bid for the T-Mobile U.S. in the first half of 2014.

We believe that a possible merger between DISH and T-Mobile U.S. has greater potential to clear regulatory hurdles than the same between Sprint and T-Mobile U.S. Currently, T-Mobile is the fourth largest telecom operator in the U.S. while Sprint is the nation's third largest.

Further, in 2011, the FCC had rejected AT&T's bid for T-Mobile U.S., stating that it wants four nationwide telecom operators to remain competitive. If DISH acquires T-Mobile U.S., the number of telecom operators in the country will remain four while the figure will come down to three if Sprint executes the transaction.

T-Mobile currently carries a Zacks Rank #3 (Hold).

CNO Financial Upgraded to Outperform

On Dec 24, 2013, we upgraded our recommendation on CNO Financial Group Inc. (NYSE:CNO-Free Report) to Outperform based on its favorable prospects and outlook for the upcoming years. This insurance holding company reported strong third-quarter results and currently carries a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

CNO Financial has delivered positive earnings surprise in three of the last four quarters, with an average beat of 15.4%. In the last reported quarter, earnings per share came in at 33 cents that surpassed the Zacks Consensus Estimate by 22.2% and increased year over year by an impressive 200%. Revenues were almost in line with the year-ago number and also surpassed the Zacks Consensus Estimate.

Apart from continued strong earnings results, the future of the company look promising. In fact, the recently stated 2014 and the long-term outlook by the company reinforces our optimism. Significant earnings improvement and an extensive capital deployment plan positions the company to achieve its long-term return on equity goal of 9% by 2015.

The value of CNO Financial's investment portfolio is steadily increasing. We believe strong liquidity positions the company to undertake further investments for enhancing infrastructure, distribution capabilities and advertising. Even management remains keen to invest $45–$55 million in key initiatives in 2014, including agent productivity, geographic expansion, product launches, worksite platform distribution, enhancing operating efficiency and customer experience.

Further, in Dec 2013, the company announced a $300 million hike in its securities repurchase program – consisting of warrants and stocks – on strong organic growth and capital generation. The company is likely to spend $250 million on securities repurchases in 2013 and $250–$300 million in 2014. We believe these efforts should help CNO Financial to improve operating performance and boost earnings going forward.

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