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Here’s Why Sprint Shares Are Up Almost 20% Today

January 26, 2016

Inside A Sprint Corp. Store Ahead Of Earnings FiguresInside A Sprint Corp. Store Ahead Of Earnings Figures

Sprint (S), the No. 4 U.S. wireless carrier, reported a smaller-than-expected quarterly loss, helped by cost-cutting measures and subscriber additions amid its turnaround efforts.

Shares of the company, which have fallen about 21 percent in 2016 through Monday, jumped almost as much on Tuesday.

Sprint, which is majority owned by Japan’s SoftBank Group, also said it expects to return to a profit on an operational basis for the full-year ending March.

Sprint added 501,000 net postpaid connections, compared with 30,000 a year earlier. Customer sign-ups, which increased for the second straight quarter after two years of declines, were driven by aggressive promotions.

“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.

The Overland Park, Kansas-based company has managed to reverse its subscriber losses and launched aggressive promotions to lure customers such as 50% discounts to users of its rival networks Verizon Communications (VZ), AT&T (T), and T-Mobile (TMUS).

Investors have been concerned about whether the company with high leverage can balance its turnaround efforts through cost cuts alongside investments to acquire users and upgrade its network.

The company, which had been burning cash at a fast rate in recent months, reported cash and cash equivalents of $2.2 billion for the third quarter ended Dec. 31, up from $2 billion in the second quarter.

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 ended Dec. 31, compared with a loss of $2.38 billion, or 60 cents per share, a year earlier.

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

For the full year, Sprint said raised its adjusted EBITDA forecast to $7.7 billion to $8 billion from its previous outlook of $6.8 billion to $7.1 billion. It said it also expects an operating income of $100 million to $300 million, compared with its previous forecast of a loss of $50 million-$250 million.