Sprint stock plunges 16.5 percent after disappointing outlook

Wall Street punished shares of Sprint Corp. on Tuesday in the wake of Monday’s report that more layoffs are coming and that management’s financial outlook has weakened.

The stock ended the day down $1.02, or 16.5 percent, at $5.18.

At one point, shares fell as low as $4.86, the lowest price since new Sprint shares began to trade with the July 2013 takeover by Tokyo-based SoftBank Corp.

Analysts were reacting to the first quarterly earnings conference with chief executive Marcelo Claure, who was appointed in mid-August.

Two analysts said investors should sit out the company’s turnaround, with one noting similarities between Claure’s mission and that of his predecessor, Dan Hesse.

“With yet another CEO taking control, we again have the groundwork laid out for a turnaround that sounds eerily similar to the last CEO’s arrival at the company,” Greg Miller told clients of Canaccord Genuity in a Tuesday morning report.

Miller cited Claure’s aim of improving subscriber additions, cutting down on customer defections, improving Sprint’s network and reducing the company’s costs.

“Although possible, we will wait and see,” Miller’s note said.

At Jefferies LLC, analyst Mike McCormack told “even the most risk-taking investors to wait this one out.”

McCormack noted that Sprint’s general guidance about next year’s financial results was nearly 20 percent less than forecasts had looked for and even less than his own “bearish” estimates had been.

Sprint had said Monday that it lost money in the three months that ended Sept. 30 and that its earnings, excluding interest and some other expenses, would be slightly higher or no higher next year. Many analysts were counting on that widely watched financial measurement improving sharply.

One problem is Sprint’s continuing loss of customers. The company said defections were weighing on its revenues and progress turning the tide would take time.

Some improvements in signing up customers were evident in September and October after Sprint announced new shared data and lower-cost unlimited plans. But losses of existing customers remain a problem.

“Not nearly as bad as it looks,” was the headline on analyst Kevin Smithen’s report at Macquarie Research. Sprint’s finances, he said, can improve quickly next year as new customer signings already are strong and defections should slow by the second half of next year.

Specifically, Smithen is looking at high-revenue phone customers, a particularly tough spot for Sprint currently. He noted recent gains in signing up new phone customers in October.

Should that strength continue, Smithen wrote, Sprint “can get close to breakeven” in the final three months of this year.

“Claure is doing the right thing by focusing on subscriber growth, in our view. The good news is that the market appears to be responding to new Sprint plans,” Smithen’s report said.

During a call with analysts Monday, Claure noted that he has been on the job only 85 days and still has work to do reshaping Sprint’s strategies. He said, for example, that some management changes will be announced next week.

Analyst Paul de Sa at Bernstein Research listed other areas Claure needs to clear up, including dealing with Sprint’s “fundamentally tarnished” brand, making money from a narrower rollout of its faster Sprint Spark network technology and tackling expensive roaming and other services Sprint buys from AT&T and Verizon.

He also suggested that investors file away Monday’s disappointing report and forget it.

“Although weak, we do not think this quarter’s results provide much insight into the company’s future performance, given the recent CEO transition and launch of several initiatives that will not begin to take effect until next quarter,” de Sa’s report said.

This story was originally published November 4, 2014 at 11:31 AM with the headline "Sprint stock plunges 16.5 percent after disappointing outlook."