From Yahoo:
Thomas Weisel Partners
Nextel Communications (NXTL; $8.21; Cap $6.69bn; Buy) - Solid
business momentum results in an "EPS story" at Nextel; Possible
upside to current estimates; Reiterate Buy.
Solid business momentum and astute balance sheet management make NXTL
one of the more interesting stocks in the telecom universe at this
time, in our view. Should current business trends continue, we
believe there is excellent potential for upward estimate revisions,
especially in 2003-2004.
We are conservatively modelling Nextel's net adds for the balance
of
2002 and look for subscriber adds of 465,000 in Q3 and 440,000 in Q4
(modestly below guidance) compared to an average of 485,000 per
quarter in 1H02. For FY02, we expect 1.87 million new subscribers,
revenue of $8.6 billion and EBITDA of $3.1 billion, slightly ahead of
guidance of $3.0billion. Our estimates assume flat EBITDA margins in
the 2H02 compared to 2Q02, which contrasts with the 1400 basis point
increase over the last four quarters (now almost 38%). In other
words, margin improvement is more likely than our estimates imply.
Nextel has made substantial progress in improving its balance sheet
this year, retiring $1.833 billion of public bonds and preferred
stock in exchange for $500.0 million in cash and 94.0 million of new
common. Along with its substantial cash balance, these advantageous
moves virtually eliminate the possibility of a balance sheet
restructuring, in our view.
Nextel is now positive EPS, generating $0.37 in Q2 (due in part to
extraordinary debt and preferred stock retirement gains). However, we
expect Nextel to report operating earnings per share of $0.58 in
2003, and $0.97 in 2004.
Based on the "new and improved" capital structure, Nextel
trades at
6.5x 2002 estimated EBITDA and 5.7x 2003- estimated EBITDA, a
discount to Sprint PCS and a modest premium to AT&T Wireless. On a
P/E basis, Nextel (growing EPS at 25+% compounded beginning in 2003)
is trading at 14.2x our 2003 EPS estimate of $0.58, versus the
average of the local telephone group of 10.9x (growing at 5-10%
compounded). We reiterate our Buy rating on the shares of Nextel
Communications.
Estimates: Dec '02 Net Adds 1.87 million, Rev. $8.6 bn, EBITDA
$3.1
bn, EPS $0.05; Dec '03 Net Adds 1.5 million, Rev. $9.6 bn, EBITDA
$3.6 bn, EPS $0.58 |
