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T-Mobile (TMUS) Up 2.6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for T-Mobile (TMUS - Free Report) . Shares have added about 2.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is T-Mobile due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

T-Mobile Q4 Earnings Beat Estimates, Revenues Up Y/Y

T-Mobile reported mixed fourth-quarter 2021 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same. The wireless carrier witnessed record postpaid account and postpaid customer net additions in 2021.

Net Income

Net income in the quarter was $422 million or 34 cents per share compared with $750 million or 60 cents per share in the prior-year quarter. The decline was primarily due to a planned increase in merger-related costs. Adjusted earnings came in at $1.10 per share. The bottom line beat the Zacks Consensus Estimate by 94 cents, delivering a surprise of 587.5%. In 2021, net income was $3,024 million or $2.41 per share compared with $3,064 million or $2.37 per share in 2020.

Revenues

Quarterly total revenues inched up 2.2% year over year to $20,785 million, driven by T-Mobile’s customer growth momentum and synergy-backed model. However, the top line lagged the consensus estimate of $21,120 million. In 2021, total revenues increased 17.1% year over year to $80,118 million.

Quarterly Segment Results

Total Service revenues grew 5.5% year over year to $14,963 million. Within it, postpaid revenues were $10,963 million, up 6.9%. T-Mobile recorded 1.8 million postpaid net customer additions and 844 thousand postpaid phone net customer additions in the quarter. Postpaid phone average revenue per user (ARPU) improved 0.4% year over year to $48.03. Prepaid revenues were $2,474 million, up 5.1% year over year. Prepaid net customer additions were 49 thousand in the quarter. Prepaid ARPU grew 3.3% to $39.32. Wholesale revenues were $975 million, up 5.2% year over year. Other service revenues were $551 million, down 15%.

Equipment revenues totaled $5,506 million, down 7.8% year over year. Other revenues were $316 million, up 68.1%.

Other Quarterly Details

Total operating expenses increased to $19,722 million from $18,629 million in the year-ago quarter. This was due to the higher cost of equipment sales and selling, general and administrative expenses. Operating income decreased to $1,063 million from $1,712 million. T-Mobile recorded an adjusted EBITDA of $6,302 million compared with $6,746 million a year ago. Merger-related costs were $1,243 million in the quarter.

Cash Flow & Liquidity

In 2021, T-Mobile generated $13,917 million of net cash from operating activities compared with $8,640 million in 2020. Free cash flow was $5,646 million compared with $658 million. As of Dec 31, 2021, the company had $6,631 million in cash and cash equivalents with $67,076 million of long-term debt.

2022 Guidance

For full-year 2022, T-Mobile expects postpaid net customer additions between 5 million and 5.5 million. Core adjusted EBITDA (adjusted EBITDA less lease revenues) is estimated to be between $25.6 billion and $26.1 billion. The company anticipates cash from operating activities between $15.5 billion and $16.1 billion. Capital expenditures are projected between $13 billion and $13.5 billion. Free cash flow is estimated in the $7.1 billion to $7.6 billion range.

T-Mobile continues to make significant progress on integration activities. It ended 2021 with nearly 64% of Sprint customers transitioning to the T-Mobile network. The company expects to complete the network migration by mid-2022. Ultra Capacity 5G covered 210 million people and Extended Range 5G covered 94% of people at the end of 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, T-Mobile has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, T-Mobile has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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