Sprint loss shrinks on cost cuts, user gains; shares soar 22 percent

(Reuters) - Sprint Corp, the No. 4 U.S. wireless carrier, on Tuesday posted a smaller-than-expected quarterly loss and raised its earnings outlook, helped by a cost-cutting drive and a boost in subscribers, sending its stock up as much as 22 percent.

The logo of U.S. mobile network operator Sprint Corp is seen at a Sprint store in San Marcos, California August 3, 2015. REUTERS/Mike Blake

Sprint shares soared to a session high of $3.08 before receding to $3.01 in the afternoon, still up more than 19 percent on the day. Those gains nearly erased the 21 percent fall in the stock in 2016 through its close on Monday.

Sprint, majority owned by Japan’s SoftBank Group Corp, expects to post an operating profit, before earnings and taxes, for its fiscal year ending March, reversing its previous forecast of a loss.

Overland Park, Kansas-based Sprint added 501,000 net postpaid connections, up from 30,000 a year earlier but below an analysts’ average estimate of 510,000, according to market research firm FactSet StreetAccount.

Customer sign-ups, up for the second straight quarter after two years of declines, were helped by 50 percent discounts to users of its U.S. rivals.

“There is no question that Sprint’s management team is finally showing real urgency in taking necessary measures to stop the bleeding,” MoffettNathanson analyst Craig Moffett said. “They still have a lot of heavy lifting to do.”

Sprint’s plan to cut about $2 billion to $2.5 billion in costs is on track, executives said on an earnings call. On Monday, the company announced it was axing at least 2,500 jobs..

Aided by Softbank, Sprint has set up two leasing vehicles to fund handset leasing and network investments, removing those costs from its balance sheet.

Given this third-party funding, “there’s still confusion” around Sprint’s cash flow, Jefferies analyst Mike McCormack said.

Excluding items, the company lost 21 cents per share, beating the average analyst estimate of a net loss of 25 cents per share.

Sprint posted a net loss of $836 million, or 21 cents per share, in the third quarter against a $2.38 billion loss, or 60 cents per share, a year earlier.

Sprint’s net operating revenue fell 9.7 percent to $8.11 billion, below the average analyst estimate of $8.23 billion.

For fiscal 2015, it raised its adjusted EBITDA - or operating earnings before depreciation and amortization and items like severance costs - to $7.7 billion-$8 billion from its previous outlook of $6.8 billion to $7.1 billion.

It expects fiscal 2015 operating income at $100 million-$300 million, up from a previous forecast of a $50 million-$250 million loss.

Reporting by Malathi Nayak in New York and Kshitiz Goliya in Bengaluru; Editing by Anil D’Silva, Saumyadeb Chakrabarty and W Simon