Earnings Preview: Leap Wireless - Analyst Blog
November 05 2012 - 11:20AM
Zacks
Leap Wireless International
Inc. (LEAP) is slated to release its third-quarter 2012
financial results on Wednesday, November 7, before the opening
bell. The Zacks Consensus Estimate for the quarter is pegged at a
loss of 76 cents, representing an annualized growth of 15.32%.
With respect to earnings surprises,
Leap Wireless has underperformed the Zacks Consensus Estimate in
three of the last four quarters with an average of negative
10.32%.
Second Quarter
Recap
On August 6, Time Warner reported
its second-quarter 2012 financial results. GAAP net loss, in the
second quarter of 2012, was $41.6 million or a loss of $0.54 per
share compared with $65.2 million or $0.85 per share in the
prior-year quarter. Quarterly earnings per share of a loss of $0.54
were higher than the Zacks Consensus Estimate of a loss of
$0.52.
Quarterly total revenue was $786.8
million, up 3.5% year over year, but well below the Zacks Consensus
Estimate of $839 million. In the second quarter of 2012, operating
loss was $31.6 million compared with $12.3 million in the
prior-year quarter. Quarterly adjusted OIBDA was $190.8 million, up
18.8% year over year.
Agreement of Estimate
Revisions
In the last 30 days, out of the
total 19 estimates, three were revised upward while two moved in
the opposite direction for the third quarter of 2012. However, for
the fourth quarter of 2012, out of the total 18 estimates, only one
upward revision was witnessed, while three moved downward over the
same time frame.
For 2012, out of the total 18
estimates, two were revised upward while three witnessed downward
revisions, over the past one month. The upward estimate revision
continues for 2013, where out of the 19 estimates, four were
revised upward, while one moved in the opposite direction over the
same period.
Magnitude of Estimate
Revisions
Over the last 30 days, the current
Zacks Consensus Estimate has remained unchanged for the third
quarter of 2012 while it decreased by a penny to a loss of $1.22
for the fourth quarter of 2012. Alike the fourth quarter, the
current Zacks Consensus Estimate also fell by a penny for 2012 over
the last 30 days, while the estimate decreased by 4 cents to $3.07
for 2013 over the same time frame.
Our
Recommendation
Leap Wireless remains one of the
low-cost prepaid wireless service providers in the U.S, and offers
a range of cheap service plans including its popular Muve Music
service thus enabling the company to attract young customers. The
company is focusing on upgrading its existing customers by selling
Android-based smartphones, which in turn, will not only drive the
company’s top-line sales but also contribute to customer retention
as well as customer additions.
However, the major concern for Leap
Wireless is the growing competition in the U.S. low-cost prepaid
wireless phone market. Traditionally, the company competes with the
likes of MetroPCS Communications Inc. (PCS), Boost
Mobile, the prepaid subsidiary of Sprint Nextel
Corp. (S) and Tracfone – the prepaid subsidiary of
America Movil S.A.B. (AMX). Recently, the two
largest nationwide carriers, viz., Verizon Communications
Inc. (VZ) and AT&T Inc. (T) entered
the wireless prepaid phone market after the growth rate of
lucrative postpaid wireless market subdued.
We maintain our long-term Neutral
recommendation on Leap Wireless International Inc. (LEAP).
Currently, the company retains a Zacks #3 Rank, implying a
short-term Hold rating.
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
LEAP WIRELESS (LEAP): Free Stock Analysis Report
METROPCS COMMUN (PCS): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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