With second-quarter earnings drawing to a close, industry peers are doing various analysis and comparisons to gauge the underlying metrics and relative performance. Let us perform a similar comparative analysis between two stocks in the Zacks Wireless National Industry — Verizon Communications Inc. (VZ - Free Report) and T-Mobile US, Inc. (TMUS - Free Report) — to pick the better investment option.
Earnings Scoresheet
Verizon continued its solid performance in second-quarter 2018, primarily led by the wireless business. The company recorded healthy top-line growth backed by solid service revenues. The bottom line also benefited from significant savings from the tax reform. Adjusted earnings were $1.20 per share compared with 96 cents in the year-earlier quarter, comfortably exceeding the Zacks Consensus Estimate of $1.14. Consolidated GAAP revenues increased 5.4% year over year to $32,203 million and exceeded the Zacks Consensus Estimate of $31,718 million.
T-Mobile reported healthy financial results, driven by record-high service revenues and profitability. Net income for the reported quarter came in at $782 million or 92 cents per share compared with $567 million or 67 cents per share in the year-ago quarter. The healthy year-over-year increase was attributable to the positive impacts of the adoption of the new revenue standard and hurricane-related reimbursements. The bottom line beat the Zacks Consensus Estimate by 6 cents. Quarterly total revenues increased 3.5% year over year to $10,571 million, primarily driven by growth in service revenues, partly offset by lower equipment revenues. The top line missed the Zacks Consensus Estimate of $10,636 million.
Based on second-quarter earnings, Verizon has a clear edge over T-Mobile due to a better earnings and sales surprise percentage.
Price Performance
Over the past year, Verizon has outperformed T-Mobile with an average return of 7.6% compared with a gain of 1.9% for the latter while the industry declined 6.8%.
Guidance
For full-year 2018, Verizon reiterated its earlier guidance and continues to expect both GAAP revenues and adjusted earnings per share to increase in low single-digit percentage rates driven by expected savings from tax reform and higher cash flow from operations. Capital expenditures for 2018 are likely to be in the range of $17.0 billion to $17.8 billion.
For 2018, T-Mobile increased its expectation of postpaid net customer additions to 3-3.6 million, up from the previous target range of 2.6-3.3 million. Adjusted EBITDA is expected between $11.5 billion and $11.9 billion, up from the previous target range of $11.4-$11.8 billion, which includes leasing revenues of $0.6-$0.7 billion. The three-year (2016-2019) compound annual growth rate guidance for net cash provided by operating activities and free cash flow remains unchanged at 7-12% and 46-48%, respectively.
Estimate Revisions
Post earnings release, Verizon’s current-year estimates increased from $4.58 to $4.65 per share (up 1.5%). T-Mobile’s current-year estimates increased to $3.18 from $3.16 post earnings release (up 0.6%). With positive estimate revisions, investor sentiments appear to be more bullish on Verizon than T-Mobile with respect to current-year estimates.
Zacks Rank
Both Verizon and T-Mobile currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
To Sum Up
Based on the current scenario, Verizon seems to have trumped T-Mobile on most fronts and stands out as a better investment option. A couple of better-ranked stocks in the industry are AT&T Inc. (T - Free Report) and United States Cellular Corporation (USM - Free Report) , both sporting a Zacks Rank #1.
AT&T has a long-term earnings growth expectation of 3.4%. It surpassed estimates twice in the trailing four quarters with an average positive earnings surprise of 5.9%.
United States Cellular Corporation has a long-term earnings growth expectation of 1%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 303.6%.
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With second-quarter earnings drawing to a close, industry peers are doing various analysis and comparisons to gauge the underlying metrics and relative performance. Let us perform a similar comparative analysis between two stocks in the Zacks Wireless National Industry — Verizon Communications Inc. (VZ - Free Report) and T-Mobile US, Inc. (TMUS - Free Report) — to pick the better investment option.
Earnings Scoresheet
Verizon continued its solid performance in second-quarter 2018, primarily led by the wireless business. The company recorded healthy top-line growth backed by solid service revenues. The bottom line also benefited from significant savings from the tax reform. Adjusted earnings were $1.20 per share compared with 96 cents in the year-earlier quarter, comfortably exceeding the Zacks Consensus Estimate of $1.14. Consolidated GAAP revenues increased 5.4% year over year to $32,203 million and exceeded the Zacks Consensus Estimate of $31,718 million.
T-Mobile reported healthy financial results, driven by record-high service revenues and profitability. Net income for the reported quarter came in at $782 million or 92 cents per share compared with $567 million or 67 cents per share in the year-ago quarter. The healthy year-over-year increase was attributable to the positive impacts of the adoption of the new revenue standard and hurricane-related reimbursements. The bottom line beat the Zacks Consensus Estimate by 6 cents. Quarterly total revenues increased 3.5% year over year to $10,571 million, primarily driven by growth in service revenues, partly offset by lower equipment revenues. The top line missed the Zacks Consensus Estimate of $10,636 million.
Based on second-quarter earnings, Verizon has a clear edge over T-Mobile due to a better earnings and sales surprise percentage.
Price Performance
Over the past year, Verizon has outperformed T-Mobile with an average return of 7.6% compared with a gain of 1.9% for the latter while the industry declined 6.8%.
Guidance
For full-year 2018, Verizon reiterated its earlier guidance and continues to expect both GAAP revenues and adjusted earnings per share to increase in low single-digit percentage rates driven by expected savings from tax reform and higher cash flow from operations. Capital expenditures for 2018 are likely to be in the range of $17.0 billion to $17.8 billion.
For 2018, T-Mobile increased its expectation of postpaid net customer additions to 3-3.6 million, up from the previous target range of 2.6-3.3 million. Adjusted EBITDA is expected between $11.5 billion and $11.9 billion, up from the previous target range of $11.4-$11.8 billion, which includes leasing revenues of $0.6-$0.7 billion. The three-year (2016-2019) compound annual growth rate guidance for net cash provided by operating activities and free cash flow remains unchanged at 7-12% and 46-48%, respectively.
Estimate Revisions
Post earnings release, Verizon’s current-year estimates increased from $4.58 to $4.65 per share (up 1.5%). T-Mobile’s current-year estimates increased to $3.18 from $3.16 post earnings release (up 0.6%). With positive estimate revisions, investor sentiments appear to be more bullish on Verizon than T-Mobile with respect to current-year estimates.
Zacks Rank
Both Verizon and T-Mobile currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
To Sum Up
Based on the current scenario, Verizon seems to have trumped T-Mobile on most fronts and stands out as a better investment option. A couple of better-ranked stocks in the industry are AT&T Inc. (T - Free Report) and United States Cellular Corporation (USM - Free Report) , both sporting a Zacks Rank #1.
AT&T has a long-term earnings growth expectation of 3.4%. It surpassed estimates twice in the trailing four quarters with an average positive earnings surprise of 5.9%.
United States Cellular Corporation has a long-term earnings growth expectation of 1%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 303.6%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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