DBAB quarter preview: NXTL: Robust 2Q Results Expected Thursday (July 15)
Deutsche Banc Alex. Brown - US Equities
Jeffrey L. Hines,Bo Fifer
July 12, 1999
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NEXTEL COMMUNICATIONS INC. [NXTL] "STRONG BUY"
Robust 2Q Results Expected Thursday (July 15)
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Date: 07/12/1999 EPS 1998A 1999E 2000E
Price: 50.0 1Q (1.53) (1.66)A (0.93)
52-Wk Range: 51 - 15 2Q (1.94) (1.40) (0.91)
Ann Dividend: 0.0 3Q (1.56) (1.17) (0.79)
Ann Div Yld: 0.00% 4Q (1.43) (1.06) (0.59)
Mkt Cap (mm): 19,700 FY(Dec.) (6.46) (5.29) (3.22)
3-Yr Growth: FY P/EPS NM NM NM
CY EPS (6.46) (5.29) (3.22)
Est. Changed Yes CY P/EPS NM NM NM
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Industry: COMMUNICATIONS
Shares Outstanding(Mil.): 394.0
Return On Equity (1998) : 0.0%
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HIGHLIGHTS:
-- Nextel is expected to release 2Q 1999 results on Thursday (15-July).
We continue to expect that Nextel will post a bang-up quarter and
forecast that all of the key metrics reported will mark an improvement
versus 1Q 1999.
-- 2Q 1999 HIGHLIGHTED EXPECTATIONS: The Company has indicated that it
hopes to beat all key metrics in 2Q 1999 relative to 1Q 1999 and thus
our expectations for both ARPU and churn are likely a bit too
conservative:
Metric DBAB Est. 1Q 1999A 2Q 1998A
Net sub adds 0.415M 0.403 0.401
Churn 2.1%/month 2.0%/month 1.6%/month
ARPU $70.50/month $70.90/month $69.00/month
COA $425/gross $435/gross $458/gross
PMCF $39/month $38/month $31/month
US EBITDA $82M $42M ($53)M
ARPU = average revenue per subscriber per month, COA = cost of acquisition
per gross subscriber add, PMCF = pre-marketing cash flow per average
subscriber.
Source: Deutsche Banc Alex. Brown estimates.
-- STOCK PRICE PERFORMANCE: YTD NXTL is up 112%, ahead of our PCS Index
(up 90%) and the S&P500 (up 14%). We believe Nextel's strong recent
stock performance can be boiled down to:
1. Fully-financed - Financing risk has dropped to nil after the recent $600
million convertible offering and yesterday's McCaw announcement.
2. i1000plus - Nextel is now shipping the Internet enabled i1000plus from
Motorola and we believe investors are beginning to incorporate possible new
revenue, subscriber, etc. benefits of the product into their valuations.
3. Department of Justice ruling - The ruling with the DOJ paves the way, we
believe for Nextel to perhaps end up with 20-30 MHz of "SMR" spectrum,
essentially equivalent to what other carriers have, and also bringing lower
CapEx and other efficiencies to the Company.
4. Worldwide service - With the introduction of the i2000 later this Summer
we look for Nextel to go after what is likely at least a new $3 billion
revenue opportunity of foreign travellers with Nextel's worldwide service.
-- CONFERENCE CALL: Nextel will host a conference call on Thursday (15-
July) at 0830 EDT. The call-in number is 800-553-2173 (code #565207).
The replay number is 800-625-5288 (code #565207).
-- VALUATION: Our 12-month price objective on NXTL is $55/share based on
DCF. |
