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T-Mobile's (TMUS) Q1 Earnings Beat Estimates, Guidance Up
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T-Mobile US, Inc. (TMUS - Free Report) reported solid first-quarter 2023 results with healthy customer growth driven by diligent execution of operational plans. The Bellevue, WA-based company delivered industry-leading growth in postpaid and broadband customers driven by its nationwide 5G network and best-value combination with a focus on customers. However, the top line missed the Zacks Consensus Estimate while the bottom line beat the same.
Net Income
Net income in the quarter was $1,940 million or $1.58 per share compared with $713 million or 57 cents per share in the prior-year quarter. The significant year-over-year improvement despite top-line contraction was primarily attributable to lower operating expenses. The bottom line beat the Zacks Consensus Estimate by 7 cents.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
Quarterly total revenues declined to $19,632 million from $20,120 million despite a healthy improvement in service revenues due to lower equipment revenues owing to a challenging macroeconomic environment. The top line lagged the consensus estimate of $19,757 million.
Segment Results
Total Service revenues in the reported quarter grew 2.8% year over year to $15,546 million, led by Postpaid service revenue growth of 5.9% ($11,862 million) driven by higher customer account and average revenue per account (ARPA). T-Mobile recorded 1.3 million postpaid net customer additions and 538,000 postpaid phone net customer additions in the quarter. Postpaid phone average revenue per user (ARPU) improved marginally year over year to $48.63 as higher premium services were mostly offset by increased promotions.
Prepaid revenues declined 1.5% to $2,417 million despite net customer additions of 26,000 in the quarter. Prepaid ARPU declined 3.1% to $37.98. Wholesale and other service revenues were $1,267 million, down 13.9% year over year. The company recorded high-speed Internet net customer additions of 523,000 in the quarter for 3.2 million customers by the end of the quarter.
Equipment revenues totaled $3,719 million, down 20.8% year over year. Other revenues were $367 million, up from $298 million a year ago.
Other Details
Total operating expenses decreased to $16,235 million from $18,314 million in the year-ago quarter. Consequently, operating income improved to $3,397 million from $1,806 million. T-Mobile recorded an adjusted EBITDA of $7,199 million compared with $6,950 million a year ago.
Cash Flow & Liquidity
In the first quarter of 2023, T-Mobile generated $4,051 million of cash from operating activities compared with $3,845 million in the year-ago period. Adjusted free cash flow improved to $2,401 million from $1,649 million on higher operating cash flow.
As of Mar 31, 2023, the company had $4,540 million in cash and cash equivalents with $68,035 million of long-term debt. During the quarter, T-Mobile repurchased 33 million shares for $4.8 billion. The company has a remaining authorization of up to $5.5 billion worth of share repurchases through the end of September 2023.
Guidance Raised
T-Mobile has raised its guidance for 2023. The company currently expects postpaid net customer additions between 5.3 million and 5.7 million, up from 5 million and 5.5 million expected earlier. Core adjusted EBITDA (adjusted EBITDA less lease revenues) is estimated to be between $28.8 billion and $29.2 billion, up from $28.7 billion-$29.2 billion. It anticipates cash from operating activities within $17.9 billion to $18.3 billion, up from $17.8 billion to $18.3 billion.
Cash purchases of property and equipment, including capitalized interest, are projected between $9.4 billion and $9.7 billion, while adjusted free cash flow is estimated in the $13.2 billion to $13.6 billion range, up from $13.1 billion to $13.6 billion. Merger synergies for 2023 are expected in the range of $7.3 billion to $7.5 billion, up from $7.2 billion to $7.5 billion.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), is likely to benefit from the 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 a long-term earnings growth expectation of 14.2% and delivered an earnings surprise of 14.2%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Juniper Networks, Inc. (JNPR - Free Report) carries a Zacks Rank #2. It has a long-term earnings growth expectation of 7% and delivered an earnings surprise of 5.2%, on average, in the trailing four quarters.
Juniper is leveraging the 400-gig cycle to capture hyperscale switching opportunities inside the data center. The company is set to capitalize on the increasing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence.
Splunk Inc. , sporting a Zacks Rank #1, is another key pick. San Francisco, CA-based Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and helps in operational decision making.
Splunk’s software offerings enable users to have deep insight of their data on a real-time basis, thereby making the operational decision-making process faster. It delivered a trailing four-quarter earnings surprise of 131.1%, on average. Splunk has a long-term earnings growth expectation of 24.1%.
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T-Mobile's (TMUS) Q1 Earnings Beat Estimates, Guidance Up
T-Mobile US, Inc. (TMUS - Free Report) reported solid first-quarter 2023 results with healthy customer growth driven by diligent execution of operational plans. The Bellevue, WA-based company delivered industry-leading growth in postpaid and broadband customers driven by its nationwide 5G network and best-value combination with a focus on customers. However, the top line missed the Zacks Consensus Estimate while the bottom line beat the same.
Net Income
Net income in the quarter was $1,940 million or $1.58 per share compared with $713 million or 57 cents per share in the prior-year quarter. The significant year-over-year improvement despite top-line contraction was primarily attributable to lower operating expenses. The bottom line beat the Zacks Consensus Estimate by 7 cents.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
T-Mobile US, Inc. price-consensus-eps-surprise-chart | T-Mobile US, Inc. Quote
Revenues
Quarterly total revenues declined to $19,632 million from $20,120 million despite a healthy improvement in service revenues due to lower equipment revenues owing to a challenging macroeconomic environment. The top line lagged the consensus estimate of $19,757 million.
Segment Results
Total Service revenues in the reported quarter grew 2.8% year over year to $15,546 million, led by Postpaid service revenue growth of 5.9% ($11,862 million) driven by higher customer account and average revenue per account (ARPA). T-Mobile recorded 1.3 million postpaid net customer additions and 538,000 postpaid phone net customer additions in the quarter. Postpaid phone average revenue per user (ARPU) improved marginally year over year to $48.63 as higher premium services were mostly offset by increased promotions.
Prepaid revenues declined 1.5% to $2,417 million despite net customer additions of 26,000 in the quarter. Prepaid ARPU declined 3.1% to $37.98. Wholesale and other service revenues were $1,267 million, down 13.9% year over year. The company recorded high-speed Internet net customer additions of 523,000 in the quarter for 3.2 million customers by the end of the quarter.
Equipment revenues totaled $3,719 million, down 20.8% year over year. Other revenues were $367 million, up from $298 million a year ago.
Other Details
Total operating expenses decreased to $16,235 million from $18,314 million in the year-ago quarter. Consequently, operating income improved to $3,397 million from $1,806 million. T-Mobile recorded an adjusted EBITDA of $7,199 million compared with $6,950 million a year ago.
Cash Flow & Liquidity
In the first quarter of 2023, T-Mobile generated $4,051 million of cash from operating activities compared with $3,845 million in the year-ago period. Adjusted free cash flow improved to $2,401 million from $1,649 million on higher operating cash flow.
As of Mar 31, 2023, the company had $4,540 million in cash and cash equivalents with $68,035 million of long-term debt. During the quarter, T-Mobile repurchased 33 million shares for $4.8 billion. The company has a remaining authorization of up to $5.5 billion worth of share repurchases through the end of September 2023.
Guidance Raised
T-Mobile has raised its guidance for 2023. The company currently expects postpaid net customer additions between 5.3 million and 5.7 million, up from 5 million and 5.5 million expected earlier. Core adjusted EBITDA (adjusted EBITDA less lease revenues) is estimated to be between $28.8 billion and $29.2 billion, up from $28.7 billion-$29.2 billion. It anticipates cash from operating activities within $17.9 billion to $18.3 billion, up from $17.8 billion to $18.3 billion.
Cash purchases of property and equipment, including capitalized interest, are projected between $9.4 billion and $9.7 billion, while adjusted free cash flow is estimated in the $13.2 billion to $13.6 billion range, up from $13.1 billion to $13.6 billion. Merger synergies for 2023 are expected in the range of $7.3 billion to $7.5 billion, up from $7.2 billion to $7.5 billion.
Zacks Rank
T-Mobile currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), is likely to benefit from the 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 a long-term earnings growth expectation of 14.2% and delivered an earnings surprise of 14.2%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Juniper Networks, Inc. (JNPR - Free Report) carries a Zacks Rank #2. It has a long-term earnings growth expectation of 7% and delivered an earnings surprise of 5.2%, on average, in the trailing four quarters.
Juniper is leveraging the 400-gig cycle to capture hyperscale switching opportunities inside the data center. The company is set to capitalize on the increasing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence.
Splunk Inc. , sporting a Zacks Rank #1, is another key pick. San Francisco, CA-based Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and helps in operational decision making.
Splunk’s software offerings enable users to have deep insight of their data on a real-time basis, thereby making the operational decision-making process faster. It delivered a trailing four-quarter earnings surprise of 131.1%, on average. Splunk has a long-term earnings growth expectation of 24.1%.