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T-Mobile (TMUS) Beats on Q1 Earnings, Raises 2021 Guidance

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T-Mobile US, Inc. (TMUS - Free Report) reported impressive first-quarter 2021 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate.

The wireless carrier recorded industry-leading total net additions, postpaid net additions and postpaid phone net additions.

Net Income

Net income in the March quarter was $933 million or 74 cents per share compared with $951 million or $1.10 per share in the year-ago quarter. Higher revenues were offset by an increase in expenses, which resulted from the Sprint merger. Earnings per share (EPS) decreased due to lower net income and a higher number of outstanding shares due to the merger.

Adjusted EPS came in at 92 cents, which beat the Zacks Consensus Estimate by 37 cents, delivering a surprise of 67.3%.

TMobile US, Inc. Price, Consensus and EPS Surprise TMobile US, Inc. Price, Consensus and EPS Surprise

TMobile US, Inc. price-consensus-eps-surprise-chart | TMobile US, Inc. Quote

Revenues

Quarterly total revenues soared 77.8% year over year to $19,759 million, driven by the Sprint merger and customer growth. Also, the top line surpassed the consensus estimate of $18,845 million.

Segment Results

Total Service revenues grew 60.4% year over year to $14,192 million.

Under it, postpaid revenues were $10,303 million, up 75% year over year. The company recorded 1.2 million postpaid net customer additions and 773,000 postpaid phone net customer additions in the quarter. Postpaid phone average revenue per user (ARPU) increased 3.3% year over year to $47.30.

Prepaid revenues were $2,351 million, down 0.9% year over year. Prepaid net customer additions were 151,000 in the quarter. Prepaid ARPU slipped 0.8% to $37.81. Wholesale revenues were $897 million, up 176% year over year. Roaming and other service revenues were $641 million, up 145.6%.

Equipment revenues totaled $5,346 million, up 152.5% year over year. Other revenues were $221 million, up 47.3%.

Other Details

Total operating expenses increased to $17,620 million from $9,574 million in the year-ago quarter. This was due to the higher cost of services and equipment sales. Selling, general and administrative expenses and depreciation and amortization charges increased as well.  

Operating income improved to $2,139 million from $1,539 million in the prior-year quarter. T-Mobile recorded an adjusted EBITDA of $6,905 million compared with $3,665 million in the prior-year quarter. Merger-related costs were $298 million in the reported quarter.

Cash Flow & Liquidity

During the first quarter of 2021, T-Mobile generated $3,661 million of net cash from operating activities compared with $1,617 million in the year-ago quarter. Free cash flow was $1,304 million, up from $732 million.

As of Mar 31, 2021, the company had $6,677 million in cash and cash equivalents with $66,395 million of long-term debt. This compares with the respective tallies of $10,385 million and $61,830 million at the end of the previous quarter.

2021 Guidance Raised

T-Mobile has raised guidance for 2021 led by meaningful progress on integration activities. About 20% of Sprint customers have been moved to the T-Mobile network.

The company now expects postpaid net customer additions between 4.4 million and 4.9 million, an increase from prior guidance of 4 million to 4.7 million. Core adjusted EBITDA is estimated to be between $22.8 billion and $23.2 billion, up from prior guidance of $22.6 billion to $23.1 billion.

Cash purchases of property and equipment are anticipated to be at the high end of the prior guidance range of $11.7 billion to $12 billion. Net cash from operating activities is expected to be between $13.2 billion and $13.6 billion, an increase from prior guidance of $13 billion to $13.5 billion. Free cash flow is estimated to be between $5.1 billion and $5.5 billion, an increase from prior guidance of $4.9 billion to $5.4 billion.

Looking Ahead

T-Mobile’s Extended Range 5G covers 295 million people across 1.6 million square miles. That’s four times more than Verizon (VZ - Free Report) and two times more than AT&T (T - Free Report) . The superfast Ultra Capacity 5G covers 140 million people and is on track to reach 200 million nationwide by the end of 2021.

Zacks Rank & Stocks to Consider

T-Mobile currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the industry is Cogent Communications Holdings, Inc. (CCOI - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cogent delivered a trailing four-quarter earnings surprise of 29%, on average.

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