CHICAGO, Feb. 11, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: PepsiCo Inc. (NYSE: PEP), Sprint Nextel (NYSE: S), Clearwire Corp. (Nasdaq: CLWR), AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ).
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Here are highlights from Thursday's Analyst Blog:
Pepsico Beats by a Penny
PepsiCo Inc. (NYSE: PEP) reported fourth quarter and full fiscal 2010 results.
New York-based PepsiCo's core earnings advanced 17% to $1.05 per share in the quarter compared to the year-ago period. Earnings were a penny above the Zacks Consensus Estimate of $1.04.
The year-over-year growth reflects the acquisition of its two anchor bottlers, broad-based gains across its snack and beverage portfolio in key international markets, disciplined investments and prudent cost controls.
For the full year, earnings grew 12% year-over-year to $4.13 a share. Annual earnings were also a penny above the Zacks Consensus Estimate.
Based on the fourth quarter and full year results, PepsiCo expects earnings per share growth of 7%–8% on the basis of core constant currency from its fiscal 2010 earnings of $4.13 per share.
Top Line and Margin Details
The quarterly total sales jumped 37% to $18.2 billion in the quarter from $13.3 billion in prior-year quarter, demonstrating strong growth across its business. Revenues were also above the Zacks Consensus Estimate of $17.7 billion.
Top line for fiscal 2010 also advanced 34% year-over-year to $57.8 billion versus $43.2 billion in fiscal 2009. Annual revenues were also above the Zacks Consensus estimate of $57.3 billion.
In the quarter, gross margin expanded 128 basis points (bps) to 54.0% versus the prior year period. PepsiCo registered an operating profit of $2.2 billion, up 10% compared with $2.0 billion in the earlier year period. For the full year 2010, operating profit increased 4% to $8.3 billion.
Sprint Misses, Loss Narrows
Sprint Nextel (NYSE: S), the third-largest U.S. wireless carrier, reported fourth quarter 2010 adjusted net loss per share of 31 cents missing the Zacks Consensus Estimate of net loss of 29 cents. Sprint reported its fourth quarter results before the opening bell.
Adjusted net loss narrowed from the year-ago loss of 34 cents. The year-over-year loss narrowed as Sprint gained customers from its expanded fourth generation long term evolution (4G LTE) services.
Fiscal 2010 adjusted net loss expanded to $1.16 compared with a net loss of 84 cents in the prior year.
Consolidated operating revenue grew 6% year over year to $8.3 billion in the reported quarter and was above the Zacks Consensus Estimate of $8.18 billion.
Higher revenues were driven by strong prepaid Boost service and equipment revenues partially offset by lower contributions from its wireline and post-paid wireless businesses. Consolidated operating revenue inched up 1% to $32.6 billion in fiscal 2010 from $32.3 billion in 2009.
Adjusted OIBDA (operating income/loss before depreciation, amortization, asset impairments and abandonments) fell 7% year over year to $1.3 billion. Higher handset subsidy as well as increased sales expenses dragged adjusted OBIDA in the fourth quarter. In fiscal 2010, adjusted OIBDA was $5.6 billion, down 12% year over year.
Wireless: Consolidated revenue from the wireless segment increased 8% year over year to $7.36 billion. Sprint gained approximately 1.1 million subscribers in the reported quarter, which represents net additions of 704,000 in retail subscribers and 393,000 in wholesale and affiliate subscribers. This represents the best wireless subscriber growth since the first quarter of 2006.
Sprint added 58,000 net post-paid customers during the quarter, which reflects a considerable improvement from a net loss of 504,000 customers in the year-ago quarter and 107,000 subscribers lost in the previous quarter.
This represents the first quarter of net post-paid additions since the second quarter of 2007. The company added 453,000 post-paid subscribers from the CDMA network while losing 395,000 customers from the iDEN network.
With regard to prepaid subscription, Sprint added a total of 646,000 customers, which represents net additions of 1.4 million CDMA customers, partially offset by a net loss of 768,000 iDEN customers.
At the end of the fourth quarter, Sprint had 49.9 million customers (including 33.1 million post-paid, 12.3 million prepaid and 4.5 million Wholesale and Affiliate) compared with 48.1 million in the year-ago quarter.
Post-paid ARPU (average revenue per user) remained flat year over year at $55 as higher monthly recurring revenue totally offsets lower coverage, casual data and text revenues. Prepaid ARPU plunged to $28 from $31 in the year-ago quarter, attributable to the Assurance Wireless plan and the acquisition of Virgin Mobile in November 2009 as Virgin Mobile customers have lower ARPU as against Boost Mobile customers.
Sprint posted post-paid churn of 1.86% compared with 2.11% in the year-ago quarter and 1.93% in the sequential quarter. The lower churn is driven by improved customer retention, handsets upgrades and new handset offerings.
Prepaid churn improved to 4.93% from 5.56% in the year-ago quarter and 5.32% in the previous quarter. The year-over-year improvement is attributable to the lower churn of Boost Monthly Unlimited subscribers and Assurance Wireless customers.
Wireline: Revenues from the wireline segment declined 7% year over year to $1.2 billion owing to erosion in voice and data revenues declining 11.3% and 13.4%, respectively. Internet revenues also dropped 2.4% year over year.
Sprint enjoys a strong balance sheet with approximately $5.5 billion in cash and short-term investments at the end of 2010 compared with $3.9 billion at the end of 2009. Long-term debt decreased to $18.5 billion from $20.3 billion in the prior year.
The company spent $608 million in capital expenditure in the fourth quarter compared with $554 million in the year-ago quarter. The company generated free cash flow of $913 million, up from $666 million in the year-ago quarter.
For 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 during 2011.
The company's deployment of 4G WiMax is a major prospect in the wireless market and may boost the company's revenues. Sprint will continue its prime focus on 4G network that currently covers 71 U.S. markets via Clearwire Corp.'s (Nasdaq: CLWR) network. This reach keeps the company well ahead of its rivals AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ).
We believe an attractive wireless product/service mix, expanding 4G network footprint, Sprint prepaid brands like Assurance Wireless and Virgin Mobile and Boost Mobile's Monthly Unlimited plans will continue to add opportunities in the wireless business. However, heavy expenditure involved in deploying 4G services, competitive threats as well as the rollout of competitive price plans by its rivals make us cautious on the stock.
We are currently maintaining our long-term Neutral recommendation on Sprint, supported by the Zacks #3 Rank (Hold).
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