PRELIMINARY 1Q RESULTS BEAT HIGH-END EXPECTATIONS--STRONG BUY
Bankers Trust Research/BT Alex. Brown Research
Bo Fifer,Jeffrey Hines
April 19, 1999
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NEXTEL COMMUNICATIONS INC. [NXTL] "STRONG BUY"
Preliminary 1Q Results Beat High-End Expectations
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Date: 04/16/1999 EPS 1998A 1999E 2000E
Price: 38.0 1Q (1.53) (1.36) (0.88)
52-Wk Range: 43 - 15 2Q (1.94) (1.25) (0.81)
Ann Dividend: 0.0 3Q (1.56) (1.03) (0.71)
Ann Div Yld: 0.00% 4Q (1.43) (0.93) (0.51)
Mkt Cap (mm): 13,832 FY(Dec.) (6.46)A (4.57) (2.91)
3-Yr Growth: FY P/EPS NM NM NM
CY EPS (6.46) (4.57) (2.91)
Est. Changed No CY P/EPS NM NM NM
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HIGHLIGHTS:
--Nextel reported very SOLID 1Q 1999 results, in our view, ahead of our
Street High expectations:
1Q HIGHLIGHTS 1Q99Actual 1Q99Est. 1Q98Actual
Net additions 415,000 400,000 371,000
ARPU (avg. rev. per sub)$71/mo $69.50/mo $66.30/mo
Churn 2.0% 2.1% 1.75%
Revenue NA $635 MM $321 MM
Cash flow $82 MM $75 MM ($95 MM)
Source: BT Alex. Brown, Company documents.
--NET-NET: Results are very solid, in our opinion, and Nextel should
remain at the top of the peer group in terms of underlying value
metrics. Impressively, ARPU INCREASED sequentially for the fourth
consecutive quarter as minutes of use per subscriber remained at roughly
400 per month. Churn, while still well below that of other PCS
companies, but had been ticking up slightly, held steady with 4Q 1998
levels at 2.0% per month. Our expectations were Street-high across the
board. Unfortunately, focus likely to be more on M&A activity and we
suspect that the Company might play down its needs to merge, which
"event traders" could view as negative. Continue to believe that others
are more interested in Nextel than perhaps Nextel is in others (i.e.,
Company not likely to sell cheaply). Wireless and Nextel remain scarce
asset. Full details after conference call.
--CONFERENCE CALL: Conference call is 0830. Call-in number is 1-800-553-
2379.
--STOCK PRICE PERFORMANCE: NXTL is up 61% YTD, behind our PCS Index (up
53%) but ahead of the S&P500 (up 7%).
--VALUATION: Reiterate "strong buy" ratings on NXTL with 12-month price
objectives (based on our DCF) of $45/share. Our underlying price
objective on NXTL is $49/share based on our discounted cash flow.
Current 12-month price target of $45/share heavily discounts non-fully
funded Nextel International operations. |
