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Telecoms call in mixed results
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October 20, 1998: 1:21 p.m. ET
Sprint shatters estimate, Qwest turns from black to red and BellSouth meets its mark
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NEW YORK (CNNfn) - Sprint, the nation's third-largest long-distance company, blew past analysts' estimates Tuesday with record third-quarter revenue and double-digit growth in operating results.
Meanwhile, Qwest Communications, a Denver, Colo.-based multimedia communications company, saw its bottom line turn from black to red due to merger charges.
And Bell South rang in with third-quarter profits on track with Wall Street estimates.
Analysts say they weren't surprised by the companies' overall solid results, adding they reflect the steady growth of the industry as a whole.
"The telecom market overall has been strong and a lot of the traditional carriers have been showing solid growth," said Goldman Sachs telecom analyst Richard Klugman. "We think that will continue."
He added that the same emerging market pressures that have weighed down the performance of many other industries have had the inverse effect on telecoms.
"I would say the phone companies have benefited in the respect that investors have come to appreciate their lack of international exposure," he said.
Mixed Earnings
Sprint posted net income of $239.3 million, or 54 cents a diluted share, for the three months ended Sept. 30, up from $211.7 million, or 49 cents a share, for the same period last year.
Analysts predicted the company would earn 45 cents a share, according to First Call consensus estimates.
Sprint's revenue during the quarter rose 7.5 percent to $4.1 billion from $3.78 billion last year.
"The third quarter was another indication that our core operations are prospering due to strong execution, savvy marketing, award-winning customer service and the latest cutting-edge technology," said William T. Esrey, Sprint's chairman and chief executive officer.
"Long-distance revenue, operating income, operating cash flow and volumes continue to grow at a healthy clip, while our Local Telecommunications division reported another strong gain in access lines and operating income," he added. "Our continuing improvement in economic value creation also clearly demonstrates the core businesses' sharp focus on maximizing capital returns."
Sprint's long-distance revenue rose 9.2 percent to $2.46 billion from $2.25 billion last year.
For the nine-month period, however, Sprint's net income fell to $664.9 billion, or $1.51 per diluted share, from $757.6 billion, or $1.74 per share, a year ago.
Sprint (FON) shares rose 2-1/4 to 77-7/16 following the announcement Tuesday on the New York Stock Exchange.
(Click here for a chart of Sprint's stock activity)
In related news, Qwest reported Tuesday a net loss of $5 million, or 2 cents per diluted share. That compares with profits of $12.8 million, or 6 cents per share, a year ago.
Analysts predicted the company would lose 6 cents a share.
On an operating basis, Qwest's earnings more than doubled to $41 million, up from $20 million last year.
Revenue during the quarter rose to $806.8 million from $189 million last year.
For the first nine months, Qwest's net loss reached $888 million, or $3.42 per share, compared with earnings of $2.3 million, or 1 cent a share, in the same period last year.
Company President and Chief Executive Officer Joseph P. Nacchio said, "We're pleased with the strong operational and financial results achieved during the quarter. The customers, partners and strategic initiatives announced during the last 90 days epitomize Qwest's commitment to driving growth through the convergence of data, video and voice services."
In March, Qwest announced a $4.4 billion merger with U.S. long-distance carrier LCI International, Inc. to create the fourth-largest long-distance phone company in the United States.
Since the transaction was completed, the companies have aligned their sales organizations, consolidated product portfolios, created a new product development process, and established a uniform sales incentive program.
Shares of Qwest (QWST) jumped 1-1/2, about 4 percent, to 38-1/4 on the Nasdaq Tuesday afternoon.
(Click here for a chart of Qwest's stock activity)
Meanwhile, regional Bell operating company BellSouth Corp. of Atlanta said its third- quarter profit before one-time items rose 15.5 percent, fueled by the heightened demand for new phone lines and telecom services.
BellSouth posted earnings of $814 million, or 82 cents per diluted share, up from $705 million, or 71 cents a share, last year (excluding the sale of BellSouth's investments in two businesses).
The results were in line Wall Street's earnings expectations, according to First Call, which tracks analysts' earnings estimates.
Revenue during the quarter increased to $5.86 billion from $5.19 billion.
BellSouth (BLS) shares were up 3/4 at 77-3/4 Tuesday afternoon on the New York Stock Exchange.(Click here for a chart of BellSouth's stock activity)
Telecom stocks have remained relatively steady in recent weeks, as the stock market volatility sent investors fleeing to the safe haven of dividend-yielding, high-cash flow companies.
But as investors slowly win back confidence, Goldman Sachs analyst Robert Wilkes said telecom stock prices are likely to continue the modest downturn that began last week.
"I think the weakness in the stocks in the last week or so probably reflects the fact that they did so well from July to about the middle of this month," he said. "I think telecom as an industry is going to continue to be an above- average grower, especially in the data part of the business," he said, adding competition and the uncertain regulatory environment remain a crucial factor.
Data services include high speed phone lines and Internet access for residential and business customers. 
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Sprint
Qwest
BellSouth
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