Sprint, AT&T Rip Higher In Front of Earnings

NEW YORK (TheStreet) -- Two of the three largest wireless providers, Sprint Nextel (S) and AT&T (T), report earnings next week, when all three are trading near 2012 highs.

Investors in AT&T and Sprint will receive a few clues about what to expect from mobile peers who report earlier. Nokia ( NOK), Microsoft ( MSFT), Apple ( AAPL), and Verizon's ( VZ) report earnings before AT&T and Sprint. Research In Motion ( RIMM) already reported, and it wasn't pretty.

Sprint Nextel S Chart S data by YCharts

Who They Are: Sprint Nextel offers a comprehensive range of wireless and wireline communications services to consumer, business and government customers. It trades an average of 40.6 million shares per day with a market cap of $10 billion.

52-Week Range: $2.12 to $5.35

Book Value: $3.53

Float Short: 6.6%

Sprint is expected to report another loss when it releases second-quarter earnings before the market opens on July 26. The analyst consensus estimate is for a loss of 41 cents a share, a decline of 35 cents from a loss of 6 cents in the same period last year.

Analyst opinion is mixed about this company. Most of the analysts surveyed don't believe a buy or a sell is currently warranted. Right now, Sprint gets seven buy recommendations out of 26 analysts covering the company, 15 holds and four sells.

While the share price has bounced off its lows, shareholders from a year ago have not been rewarded for their patience. Sprint shares fell 37% in the last year, and the average analyst target price for S is $3.62. Sprint reached the average target price, making it reasonable to assume that target price increases are coming soon. In light of the earnings report date, analysts may wait until Sprint reports to update their predictions.

The company is expected to post rising year-over-year revenue of $32.56 billion for last fiscal year, compared to $32.26 billion in the previous year. The bottom line shows falling earnings of a year-over-year loss of $3.47 billion last fiscal year, compared to a loss of $2.44 billion in the previous year.

Weinstein Estimate: Sprint beats by at least 10 cents per share.

The previous Sprint's earnings release was on April 25, and the closing share price before earnings was $2.43. At a price of $3.66, Sprint has soared more than 50% in the last quarter. In the last month, the stock has climbed 7.8%. Sprint beat earnings in all of the last four quarters, with an average beat of 7 cents per share (36.1%).

Sprint took a lot of heat for signing a big commitment with Apple to bring in the iPhone. At the start of 2012, shares were near $2.10 a share, but that's yesterday's newspaper. Now Sprint is firing on all cylinders.

Apple reports earnings on July 24 after the close. The consensus analyst estimate is for a profit of $10.40 per share. U.S. iPhone sales and revenue will help shed light on what to expect from Sprint. We will have already received Verizon's earnings report on July 19. Verizon is expected to earn 64 cents to 65 cents per share.

Weaker or stronger Apple and Verizon sales will not necessarily mean that Sprint will suffer a decline or receive a boost in sales. It's the mix of sales for each that may add color. If Apple reports relatively strong iPhone sales after Verizon reports, it may indicate Sprint and AT&T sales are strong.

IPhone component production was reported as scaling higher. A thinner body and a larger screen are expected from Apple when the next addition to the iPhone family is released.

AT&T T Chart T data by YCharts

Who They Are: AT&T trades an average of 20.1 million shares per day with a marketcap of $207.3 billion.

52-Week Range: $27.41 to $36.20

Book Value: $17.86

Price To Book: 1.99

Float Short: 1.45%

AT&T is expected to report strong second-quarter earnings before the market opens on July 24. The consensus estimate is currently for earnings of 63 cents a share, up 4.8% from 60 cents in the same period last year.

Analysts are more or less sidestepping this one like a politician dancing the Washington two-step. Eighteen out of 30 analysts rate AT&T a hold, which could mean everything from "I want to rate it a sell, but that would not be good for business," to "I have no clue." Eleven analysts recommend buying the stock and one recommends selling.

T Revenue Per Share TTM Chart T Revenue Per Share TTM data by YCharts

Analyst expectations are falling, and 10 analysts now rate AT&T a "strong buy" down from 11 analysts a month ago. The stock appreciated 15.6% in the last year, and the average analyst target price for AT&T is $34.69. In the last month, the stock has fallen 1%.

The trailing 12-month price-to-earnings ratio is 15.9, the mean fiscal year price-to-earnings ratio estimate is 14.92, based on earnings of $2.37 per share this year. Investors are receiving $1.76 cents in dividends for a yield of 4.98%. For a relatively safe stock, the yield is attractive for now. Starting in 2013, when taxes on dividends explode through the roof, the dividend won't look so sexy.

T PE 10 Chart T PE 10 data by YCharts

For the same year-over-year fiscal period, revenue has improved to $124.28 billion last fiscal year, compared to $123.02 billion in the previous year. The bottom line has rising earnings year-over-year of $19.86 billion last fiscal year, compared to $12.14 billion in the previous year.

The last date AT&T released earnings was April 24, and the closing price before earnings was $31.72. With a recent closing price of $36.19, its shares have appreciated more than 14% in the last quarter.

AT&T once held an exclusive contract with Apple. That is over, but AT&T now has one with Nokia to sell the Lumia 900, which was, for a while, seizing substantial smartphone buzz. Lumia is powered by Microsoft's mobile software, and after Microsoft backstopped Nokia with free software and other aid, some thought Microsoft and Nokia might have found the comeback trail for mobile.

Obviously, a big hit with an exclusive product would be a big win for AT&T. Hopes for the Microsoft-powered Lumia 900 quickly faded when Nokia announced it lowered the price for AT&T by $100. The upside for AT&T is they are pocketing $50 and lowering the price for consumers by $50.

Since Microsoft is giving away its software anyway, the lower price doesn't have an impact other than to keep the product moving off the shelves and into the hands of consumers. Everything else being equal, the price drop is a win for Microsoft.

Weinstein Estimate: AT&T beats by 2 or more cents per share.

At the time of publication, the author did not hold a position in any stock mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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