U.S. national wireless carrier, Sprint Corp. (S - Analyst Report) is slated to report first-quarter 2016 financial numbers before the opening bell on Jul 25.

Last quarter, Sprint posted a negative earnings surprise of 16.67%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, with an average beat of 12.15%. Let’s see how things are shaping up for this announcement.

SPRINT CORP Price and EPS Surprise

Factors at Play

Sprint has been losing customers of late and is trying all means to check churn and fend off competition. However, in this regard, the company has been continually making efforts to lure customers from rival carriers such as AT&T Inc. (T - Analyst Report) and Verizon Communications Inc. (VZ - Analyst Report) by offering attractive promotional plans and discounts. This in turn has led to high cash burn and heavy losses for the company.

Further, Sprint’s decision to skip the 600 MHz low-band airwaves auction conducted by the Federal Communications Commission (FCC) will save cash for the company and limit its scope for network upgrades and expansion, which may hurt operations over the long term. Additionally, the company has a debt-laden balance sheet, negative operating cash flow and has been witnessing losses since 2007.

Nevertheless, we expect the company to benefit from its newly initiated growth and investment plans. The upcoming launch of its 5G network, promotional plan in collaboration with Amazon.com Inc., offering Amazon Prime as an add-on package to its customers, shift toward IP-enabled cloud services and sale-leaseback transactions to reduce liquidity woes are sure to boost its customer base.

Earnings Whispers

Our proven model does not conclusively show that Sprint is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Sprint has an earnings ESP of -37.50%. This is because the Most Accurate estimate stands at a loss of 11 cents while the Zacks Consensus Estimate is pegged at a loss of 8 cents.

Zacks Rank: Sprint has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stock to Consider

Here is a company that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter.

Charter Communications Inc. (CHTR - Analyst Report) which has an Earnings ESP of +404.76% and a Zacks Rank #2.