SmartMoney.com – One-Day Wonder Ring-a-Ding-Ding! By Lawrence Carrel
Sprint PCS (NYSE:PCS – news) Share price as of Monday’s close: $10.02 Share price now: $12.60 Change: 25.8%
THE JURY REMAINS out on whether the telecom debacle is over, but if the first-quarter results of Sprint PCS (NYSE:PCS – news) are any indication, the momentum may be turning.
While the nation’s fourth-ranked wireless company posted a first-quarter loss of 15 cents a share after the market closed Monday, that was a lot better than the 40 cents lost a year earlier, and beat Wall Street’s expectation for a 20-cent loss.
Especially encouraging was the 150% surge in earnings before income taxes, depreciation and amortization (Ebitda) to $640 million from $253 million a year earlier, on a 41% jump in operating revenues. PCS Group achieved these results by lowering its cost to acquire a new customer to $305 from $325 a year earlier, while raising the average monthly revenue per user by a dollar to $60.
For an industry that has seen much gloom in the form of bankruptcies, accounting scandals and balance sheets overwhelmed with debt, the PCS news seemed like a rare ray of light. PCS stock leapt 25.8% Tuesday, sending the entire sector on a strong rally.
Things weren’t quite so rosy over at PCS’s earthbound sibling, Sprint (NYSE:FON – news), which is made up of Sprint’s traditional phone and Internet business. The No. 3 U.S. long-distance telephone company said the weak economy, slim demand for data- and voice-transmission services and stiff competition as the Baby Bells entered the long-distance market weighed on sales, which slid 8% to $4.03 billion. While first-quarter earnings of 32 cents a share beat the Thomson Financial/First Call estimate by two cents, they marked an 11% drop from the 36 cents earned last year. On the bright side, the company did say long-distance rates were stabilizing after the brutal price wars, and reiterated its guidance for the year. In a sector starved for even tolerable news, that was enough to send Sprint’s stock up 20.7%.
“We continue to believe that Sprint PCS has the assets, capital structure and product offering to outperform the wireless group over the long term,” wrote William Power, an analyst at Robert W. Baird & Co., in a research note Tuesday morning. “Sprint PCS remains our top big-cap pick.” Power doesn’t hold a position in the stock and the firm doesn’t have a banking relationship with Sprint.