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T-Mobile (TMUS) Q4 Earnings Miss Despite Higher Revenues
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T-Mobile US, Inc. (TMUS - Free Report) reported mixed fourth-quarter 2023 results, with the top line beating the Zacks Consensus Estimate but the bottom line missing the same.
The Bellevue, WA-based wireless service providers reported a top-line expansion year over year, backed by industry-leading postpaid customer growth with a record low churn rate. T-Mobile continues to boast a leadership position in the 5G market. Its 5G coverage exceeds 330 million people, a greater footprint than AT&T and Verizon combined.
Net Income
Net income in the fourth quarter was $2,014 million or $1.67 per share, up from $1,477 million or $1.18 per share in the year-ago quarter. The 36.4% year-over-year growth was primarily driven by improvement in net sales and lower operating expenses. However, the bottom line fell short of the Zack Consensus Estimate of $1.90.
In 2023, the company reported a net income of $8,317 million or $6.93 per share, up from $2,590 million or $2.06 per share in 2022.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
Net sales during the quarter stood at $20,478 million, up from $20,273 million in the year-ago quarter. Despite declining equipment sales, solid growth in service revenue supported the top-line growth. The top line surpassed the Zacks Consensus Estimate of $19,692 million.
In 2023, TMUS generated $78,558 million in revenues compared with $79,571 million in 2022.
Segment Results
Total Service revenues were $16,043 million, up from $15,518 million in the year-ago quarter. The segment sales missed our revenue estimate of $16,187.5 million. The 3.4% year-over-year growth was primarily driven by solid demand for postpaid services. Net sales from Postpaid Services contributed $12,472 million in revenues, up 6% year over year.
During the quarter, T-Mobile added 1.6 million postpaid net customers, while postpaid net account additions were a staggering 299,000. Postpaid phone net customer additions were 934,000, the best in the industry. Postpaid phone churn rate was 0.96%, the lowest in the company’s history. High-speed Internet net customer additions were 541,000. Postpaid average revenues per account rose to $140.23 from $137.78 in the year-ago quarter.
Net sales from Prepaid services were $2,433 million, marginally down from $2,449 million in the year-earlier quarter. Prepaid net customer additions were 53,000 with a churn rate of 2.86%. Wholesale and other service revenues decreased to $1,138 million from $1,344 million in the year-earlier quarter. Prepaid ARPU (average revenues per user) declined to $37.55 from $38.29 in the year-ago quarter.
Equipment revenues were $4,174 million, down 6% year over year. The segment revenues beat our estimate of $3,073.9 million. Lower postpaid upgrades, driven by longer device lifecycles, led to a lower number of devices and accessories sold. Lower sales of prepaid and Assurance Wireless devices also impacted the top line in this vertical.
Other revenues were $261 million, down from the prior-year quarter’s tally of $304 million.
Other Details
Total operating expenses declined to $16,998 million from $17,526 million in the year-ago quarter. Consequently, operating income rose to $3,480 million from $2,747 million. T-Mobile recorded core adjusted EBITDA of $7,181 million compared with $6,582 million a year ago, backed by solid growth in service revenues.
Cash Flow & Liquidity
In the December quarter, T-Mobile generated $4,859 million of cash from operating activities compared with $4,336 million in the prior-year quarter. In 2023, the company generated $18,559 cash from operations compared to $16,781 million in 2022. Adjusted free cash flow was $4,305 million, up from $2,184 million in the year-earlier quarter. The growth was driven by improvement in operating cash flow and lower cash purchases of property and equipment.
As of Dec 31, 2023, the company had $5,135 million in cash and cash equivalents, with $69,903 million of long-term debt compared to the previous year’s tally of $4,507 million and $65,301 million, respectively. During the quarter, it repurchased 15.5 million shares for $2.2 billion.
Outlook
For 2024, the company expects postpaid net customer additions to be between 5 million and 5.5 million. Core adjusted EBITDA is estimated to be between $31.3-$31.9 billion. It anticipates cash from operating activities within $21.5-$22.3 billion. TMUS expects adjusted free cash flow in the band of $16.3-$16.9 billion. Capital expenditure is projected to be in the range of $8.6-$9.4 billion.
Zacks Rank & Stocks to Consider
T-Mobile currently carries a Zacks Rank #3 (Hold)
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Workday Inc. (WDAY - Free Report) , carrying a Zacks Rank #2 at present, delivered a trailing four-quarter average earnings surprise of 13.24%. In the last reported quarter, it delivered an earnings surprise of 9.29%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
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The company holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.
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T-Mobile (TMUS) Q4 Earnings Miss Despite Higher Revenues
T-Mobile US, Inc. (TMUS - Free Report) reported mixed fourth-quarter 2023 results, with the top line beating the Zacks Consensus Estimate but the bottom line missing the same.
The Bellevue, WA-based wireless service providers reported a top-line expansion year over year, backed by industry-leading postpaid customer growth with a record low churn rate. T-Mobile continues to boast a leadership position in the 5G market. Its 5G coverage exceeds 330 million people, a greater footprint than AT&T and Verizon combined.
Net Income
Net income in the fourth quarter was $2,014 million or $1.67 per share, up from $1,477 million or $1.18 per share in the year-ago quarter. The 36.4% year-over-year growth was primarily driven by improvement in net sales and lower operating expenses. However, the bottom line fell short of the Zack Consensus Estimate of $1.90.
In 2023, the company reported a net income of $8,317 million or $6.93 per share, up from $2,590 million or $2.06 per share in 2022.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
T-Mobile US, Inc. price-consensus-eps-surprise-chart | T-Mobile US, Inc. Quote
Revenues
Net sales during the quarter stood at $20,478 million, up from $20,273 million in the year-ago quarter. Despite declining equipment sales, solid growth in service revenue supported the top-line growth. The top line surpassed the Zacks Consensus Estimate of $19,692 million.
In 2023, TMUS generated $78,558 million in revenues compared with $79,571 million in 2022.
Segment Results
Total Service revenues were $16,043 million, up from $15,518 million in the year-ago quarter. The segment sales missed our revenue estimate of $16,187.5 million. The 3.4% year-over-year growth was primarily driven by solid demand for postpaid services. Net sales from Postpaid Services contributed $12,472 million in revenues, up 6% year over year.
During the quarter, T-Mobile added 1.6 million postpaid net customers, while postpaid net account additions were a staggering 299,000. Postpaid phone net customer additions were 934,000, the best in the industry. Postpaid phone churn rate was 0.96%, the lowest in the company’s history. High-speed Internet net customer additions were 541,000. Postpaid average revenues per account rose to $140.23 from $137.78 in the year-ago quarter.
Net sales from Prepaid services were $2,433 million, marginally down from $2,449 million in the year-earlier quarter. Prepaid net customer additions were 53,000 with a churn rate of 2.86%. Wholesale and other service revenues decreased to $1,138 million from $1,344 million in the year-earlier quarter. Prepaid ARPU (average revenues per user) declined to $37.55 from $38.29 in the year-ago quarter.
Equipment revenues were $4,174 million, down 6% year over year. The segment revenues beat our estimate of $3,073.9 million. Lower postpaid upgrades, driven by longer device lifecycles, led to a lower number of devices and accessories sold. Lower sales of prepaid and Assurance Wireless devices also impacted the top line in this vertical.
Other revenues were $261 million, down from the prior-year quarter’s tally of $304 million.
Other Details
Total operating expenses declined to $16,998 million from $17,526 million in the year-ago quarter. Consequently, operating income rose to $3,480 million from $2,747 million. T-Mobile recorded core adjusted EBITDA of $7,181 million compared with $6,582 million a year ago, backed by solid growth in service revenues.
Cash Flow & Liquidity
In the December quarter, T-Mobile generated $4,859 million of cash from operating activities compared with $4,336 million in the prior-year quarter. In 2023, the company generated $18,559 cash from operations compared to $16,781 million in 2022. Adjusted free cash flow was $4,305 million, up from $2,184 million in the year-earlier quarter. The growth was driven by improvement in operating cash flow and lower cash purchases of property and equipment.
As of Dec 31, 2023, the company had $5,135 million in cash and cash equivalents, with $69,903 million of long-term debt compared to the previous year’s tally of $4,507 million and $65,301 million, respectively. During the quarter, it repurchased 15.5 million shares for $2.2 billion.
Outlook
For 2024, the company expects postpaid net customer additions to be between 5 million and 5.5 million. Core adjusted EBITDA is estimated to be between $31.3-$31.9 billion. It anticipates cash from operating activities within $21.5-$22.3 billion. TMUS expects adjusted free cash flow in the band of $16.3-$16.9 billion. Capital expenditure is projected to be in the range of $8.6-$9.4 billion.
Zacks Rank & Stocks to Consider
T-Mobile currently carries a Zacks Rank #3 (Hold)
Here are some better-ranked stocks that investors may consider.
NVIDIA Corporation (NVDA - Free Report) , currently carrying a Zacks Rank #2 (Buy), delivered a trailing four-quarter average earnings surprise of 18.99%. In the last reported quarter, it delivered an earnings surprise of 19.64%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus evolved from PC graphics to AI-based solutions that support high-performance computing, gaming and virtual reality platforms.
Workday Inc. (WDAY - Free Report) , carrying a Zacks Rank #2 at present, delivered a trailing four-quarter average earnings surprise of 13.24%. In the last reported quarter, it delivered an earnings surprise of 9.29%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Arista Networks, Inc. (ANET - Free Report) , sporting a Zacks Rank #1 at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has delivered an earnings surprise of 12%, on average, in the trailing four quarters.
The company holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.