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T-Mobile (TMUS) Beats on Q2 Earnings, Raises 2021 Outlook

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

This Bellevue, WA-based wireless carrier witnessed industry-leading postpaid net additions and record service revenues.

Net Income

Net income in the June quarter was $978 million or 78 cents per share compared with $110 million or 9 cents per share in the prior-year quarter. The improvement was primarily driven by service revenue growth and synergy realization. The bottom line beat the Zacks Consensus Estimate by 26 cents, delivering a surprise of 50%.

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


Quarterly total revenues increased 12.9% year over year to $19,950 million, driven by customer growth and higher wholesale revenues. The top line surpassed the consensus estimate of $19,391 million.

Segment Results

Total Service revenues grew 9.5% year over year to $14,492 million.

Within it, postpaid revenues were $10,492 million, up 5.4% year over year. The company recorded 1.3 million postpaid net customer additions and 627 thousand postpaid phone net customer additions in the quarter. Postpaid phone average revenue per user (ARPU) declined 0.8% year over year to $47.61.

Prepaid revenues were $2,427 million, up 5% year over year. Prepaid net customer additions were 76K in the quarter. Prepaid ARPU grew 1.9% to $38.53. Wholesale revenues were $935 million, up 129.2% year over year. Other service revenues were $638 million, up 15.6%.

Equipment revenues totaled $5,215 million, up 22.2% year over year. Other revenues were $243 million, up 41.3%.

Other Details

Total operating expenses increased to $17,844 million from $16,851 million in the year-ago quarter. This was mainly due to the higher cost of services and equipment sales. Operating income improved to $2,106 million from $820 million. T-Mobile recorded an adjusted EBITDA of $6,906 million compared with $7,017 million a year ago. Merger-related costs were $611 million in the reported quarter.

Cash Flow & Liquidity

During the first half of 2021, T-Mobile generated $7,440 million of net cash from operating activities compared with $2,394 million in the prior-year period. Free cash flow (excluding gross payments for the settlement of interest rate swaps) was $2,975 million, up from $2,173 million.

As of Jun 30, 2021, the company had $7,793 million in cash and cash equivalents with $65,897 million of long-term debt.

2021 Outlook Raised

Based on the stellar performance, T-Mobile has raised outlook for full-year 2021. It now expects postpaid net customer additions between 5 million and 5.3 million, an increase from the prior guidance of 4.4 million to 4.9 million. Core adjusted EBITDA (adjusted EBITDA less lease revenues) is estimated to be between $23 billion and $23.3 billion, up from the prior guidance of $22.8 billion to $23.2 billion.

The company anticipates cash from operating activities to be between $13.6 billion and $13.9 billion, an increase from the prior guidance of $13.2 billion to $13.6 billion. Capital expenditures are projected between $12 billion and $12.3 billion, up from the prior guidance of $11.7 billion to $12 billion. Free cash flow is estimated between $5.2 billion and $5.5 billion, tweaked from the prior guidance of $5.1 billion to $5.5 billion.

Looking Ahead

T-Mobile’s Extended Range 5G covers 305 million people across 1.7 million square miles. That’s more coverage than Verizon (VZ - Free Report) and AT&T (T - Free Report) combined. The Ultra Capacity 5G covers 165 million people with average speeds of 350 Mbps, and is on track to reach 200 million by the end of this year.

The company continues to make significant progress on integration activities. One-third of Sprint customers have been moved to the T-Mobile network. Its diversified growth strategy and network leadership instill optimism.

Zacks Rank & A Stock 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.