Sprint's Up... Earnings, Merger, or Deals To Dominate (S, CLWR, DT)

Sprint Nextel Corp. (NYSE: S) is set to report earnings on Monday morning, with an earnings conference call to follow at 8:00 AM EST.  First Call has estimates at $0.02 EPS on $9.41 Billion in revenues.  Estimates for the coming quarter are $0.04 EPS on $9.25 Billion in revenues, and estimates for Fiscal Dec-2008 are $0.12 EPS on $36.67 Billion in revenues.

The only real question besides wondering if the company’s earnings report now even matters at all is if the bar has been set so low that it can’t be stepped over.

We are in the camp that the earnings are going to be awful and largely irrelevant.  There have been persistent rumors that Deutsche Telekom (NYSE: DT) is going to spring for the flailing telecom giant.  We already saw teh WiMAX deal for 2009 and beyond get announced with Clearwire (NASDAQ: CLWR) and every other technology giant.  And we know that there is interest from current and past leaders of the company in perhaps taking it private.

The good news is that this stock has finally busted out of that long-term downtrend on the chart.  That doesn’t mean it will do a V-reverse, but it means the worst has been seen.  Shares were over $20 a year ago, and shares have gone as low as $5.48.  Now at $9.38 on Friday, you have to wonder if a higher bid will come much higher since this has now risen some 70% from the lows.

Sprint could easily be trading at $11.00 or higher, and just as easily it could be back down to $8.00.  The only thing you can hope for on the earnings front itself is that the news could be less horrible than fears.  Otherwise it will take more buyout talk or more deal making to add substantial value.

Jon C. Ogg
May 11, 2008