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Will Revenue Contraction Hinder T-Mobile's (TMUS) Q2 Earnings?
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T-Mobile US, Inc. (TMUS - Free Report) is scheduled to report second-quarter 2023 results on Jul 27, after the closing bell. The company pulled off a trailing four-quarter earnings surprise of 59.04%, on average. In the last reported quarter, it delivered an earnings surprise of 4.64%.
Stiff competition in the U.S. wireless market, combined with the persistence of macroeconomic uncertainty, is likely to have induced a top-line contraction year over year.
Factors at Play
In the second quarter, the City of Bellevue selected T-Mobile’s network-based Cellular Vehicle-to-Everything (C-V2X) technology to reduce traffic fatalities. The C-V2X is an avant-garde communication technology, which includes vehicle-to-pedestrian, vehicle-to-vehicle and vehicle-to-roadside infrastructure. It enables near real-time communications between cars, traffic infrastructure and vulnerable road users.
T-Mobile also collaborated with Google Cloud to accelerate the development of advanced 5G capabilities. TMUS aims to harness the power of Google Distributed Cloud Edge to unlock various use cases to support organizations with smart and innovative solutions and drive more value to their customers. These developments are likely to have had a favorable effect on second-quarter performance.
T-Mobile also signed an agreement with HOPE Hydration to power the latter’s Smart Water refill stations. The water-tech startup firm will utilize T-Mobile as the IoT and connectivity provider for its sustainable HydroStation technology to modernize access to public drinking water facilities.
During the quarter, Valmont, a leading developer of critical infrastructure and agricultural products, selected T-Mobile’s 5G technology for beyond visual line of sight (BVLOS) drone inspection operation. BVLOS flies beyond the visual range of ground operators and requires reliable, superior connectivity for faster data transmission, optimum navigation and communication link during the flight. The three-hour inspection was conducted in a rural region and TMUS 5G ensured uninterrupted connectivity throughout the mission. This accentuates the optimum functionality of T-Mobile’s network, even in remote and difficult-to-reach areas. These are likely to be reflected in the upcoming results.
In the quarter under review, T-Mobile collaborated with Prisms VR to support students with enhanced connectivity and improve the virtual learning experience. TMUS 5G-powered VR headsets have been active in many schools across 28 states. It provides necessary bandwidth connectivity with an uninterrupted network to facilitate virtual learning. This is likely to have supported the top line during the quarter.
However, fierce competition in a highly saturated U.S. wireless market is affecting its margins. In the backdrop of persistent macroeconomic challenges, a high debt burden is limiting the company’s growth potential and affecting financial flexibility. Its policy of introducing several promotional activities such as free music streaming, video offer and price cuts on service plans is putting pressure on profitability. These factors are likely to have hurt net sales.
Our estimate for total service revenues is pegged at $15,046.3 million, suggesting a 1.8% year over year decline. Our estimate for equipment revenues is pegged at $3,888.2 million, indicating a decline from the $4,130 million reported in the year-ago quarter. Per our estimate, smartphone sales volume is expected to have declined 8% from the prior-year quarter’s level to 8.1 million. Branded postpaid and prepaid ARPU are expected to remain relatively flat year over year.
For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $19,345 million, which indicates a decline from the year-ago quarter’s reported figure of $19,701 million. The consensus estimate for adjusted earnings per share stands at $1.71, up from $1.43 reported a year ago.
Earnings Whispers
Our proven model predicts an earnings beat for T-Mobile this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is exactly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +3.94%. The Most Accurate Estimate is pegged at $1.78 while the Zacks Consensus Estimate stands at $1.71. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: T-Mobile currently has a Zacks Rank #2.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:
Meta Platforms (META - Free Report) has an Earnings ESP of +5.83% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jul 26.
ON Semiconductor (ON - Free Report) has an Earnings ESP of +1.34% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jul 31.
Image: Bigstock
Will Revenue Contraction Hinder T-Mobile's (TMUS) Q2 Earnings?
T-Mobile US, Inc. (TMUS - Free Report) is scheduled to report second-quarter 2023 results on Jul 27, after the closing bell. The company pulled off a trailing four-quarter earnings surprise of 59.04%, on average. In the last reported quarter, it delivered an earnings surprise of 4.64%.
Stiff competition in the U.S. wireless market, combined with the persistence of macroeconomic uncertainty, is likely to have induced a top-line contraction year over year.
Factors at Play
In the second quarter, the City of Bellevue selected T-Mobile’s network-based Cellular Vehicle-to-Everything (C-V2X) technology to reduce traffic fatalities. The C-V2X is an avant-garde communication technology, which includes vehicle-to-pedestrian, vehicle-to-vehicle and vehicle-to-roadside infrastructure. It enables near real-time communications between cars, traffic infrastructure and vulnerable road users.
T-Mobile also collaborated with Google Cloud to accelerate the development of advanced 5G capabilities. TMUS aims to harness the power of Google Distributed Cloud Edge to unlock various use cases to support organizations with smart and innovative solutions and drive more value to their customers. These developments are likely to have had a favorable effect on second-quarter performance.
T-Mobile also signed an agreement with HOPE Hydration to power the latter’s Smart Water refill stations. The water-tech startup firm will utilize T-Mobile as the IoT and connectivity provider for its sustainable HydroStation technology to modernize access to public drinking water facilities.
During the quarter, Valmont, a leading developer of critical infrastructure and agricultural products, selected T-Mobile’s 5G technology for beyond visual line of sight (BVLOS) drone inspection operation. BVLOS flies beyond the visual range of ground operators and requires reliable, superior connectivity for faster data transmission, optimum navigation and communication link during the flight. The three-hour inspection was conducted in a rural region and TMUS 5G ensured uninterrupted connectivity throughout the mission. This accentuates the optimum functionality of T-Mobile’s network, even in remote and difficult-to-reach areas. These are likely to be reflected in the upcoming results.
In the quarter under review, T-Mobile collaborated with Prisms VR to support students with enhanced connectivity and improve the virtual learning experience. TMUS 5G-powered VR headsets have been active in many schools across 28 states. It provides necessary bandwidth connectivity with an uninterrupted network to facilitate virtual learning. This is likely to have supported the top line during the quarter.
However, fierce competition in a highly saturated U.S. wireless market is affecting its margins. In the backdrop of persistent macroeconomic challenges, a high debt burden is limiting the company’s growth potential and affecting financial flexibility. Its policy of introducing several promotional activities such as free music streaming, video offer and price cuts on service plans is putting pressure on profitability. These factors are likely to have hurt net sales.
Our estimate for total service revenues is pegged at $15,046.3 million, suggesting a 1.8% year over year decline. Our estimate for equipment revenues is pegged at $3,888.2 million, indicating a decline from the $4,130 million reported in the year-ago quarter. Per our estimate, smartphone sales volume is expected to have declined 8% from the prior-year quarter’s level to 8.1 million. Branded postpaid and prepaid ARPU are expected to remain relatively flat year over year.
For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $19,345 million, which indicates a decline from the year-ago quarter’s reported figure of $19,701 million. The consensus estimate for adjusted earnings per share stands at $1.71, up from $1.43 reported a year ago.
Earnings Whispers
Our proven model predicts an earnings beat for T-Mobile this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is exactly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +3.94%. The Most Accurate Estimate is pegged at $1.78 while the Zacks Consensus Estimate stands at $1.71. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
T-Mobile US, Inc. Price and EPS Surprise
T-Mobile US, Inc. price-eps-surprise | T-Mobile US, Inc. Quote
Zacks Rank: T-Mobile currently has a Zacks Rank #2.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:
Monolithic Power Systems, Inc (MPWR - Free Report) is set to release quarterly numbers on Jul 31. It has an Earnings ESP of +0.31% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Meta Platforms (META - Free Report) has an Earnings ESP of +5.83% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jul 26.
ON Semiconductor (ON - Free Report) has an Earnings ESP of +1.34% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jul 31.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.