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Will Top-Line Decline Impede T-Mobile's (TMUS) Q3 Earnings?
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T-Mobile US, Inc. (TMUS - Free Report) is set to report third-quarter 2023 results on Oct 25, before the opening bell. In the last reported quarter, the company reported adjusted earnings of $1.86 per share and delivered an earnings surprise of 8.77%. The wireless service provider is expected to report a revenue contraction year over year in the third quarter, owing to intense competition and weak demand trends.
Factors at Play
In the third quarter, T-Mobile collaborated with Pixel Health to deploy a 5G hybrid network at Boston Children’s Hospital. Leveraging T-Mobile's Advanced Network Solutions, this comprehensive technology is designed to establish a robust and seamless connection across the hospital campus and ensure effective collaboration among healthcare professionals. This is the first instance when a 5G hybrid network is implemented in the healthcare sector. This is likely to have supported the top line during the quarter.
During the quarter, T-Mobile introduced a SIM-based SASE (Secure Access Service Edge) solution and network security slice to boost the cyber defense of government and business entities. The solution incorporates a zero-trust network access platform that enables organizations to establish a reliable connection between employees, various enterprise applications and resources.
TMUS launched a 5G network slicing beta with a primary focus on enhancing video calling applications. 5G network slicing will optimize the network performance per user-specific requirements. It will allow developers to test and improve the capabilities of crucial real-time communication applications. These are likely to be reflected in the upcoming results.
In the quarter under review, T-Mobile announced that SailGP, a rapidly growing global sports league, has decided to extend its partnership for seasons 4 and 5 till 2025. SailGP is aiming to enhance the fan experience with immersive views of live race events by leveraging T-Mobile's 5G hybrid mobile network technology. TMUS, as the official wireless partner of Major League Baseball, has also introduced various features at the MLB All-Star event, powered by its industry-leading 5G portfolio. These developments are likely to have had a favorable effect on third-quarter performance.
Despite management’s efforts to improve profitability and increase cash flow conversion, intense competition from other established players will likely have impacted the top line. The company’s strategy of launching low-priced service plans to attract customers and maintain competitiveness is expected to have impacted profits as well. Several promotional activities, such as free music streaming and video offers, are also affecting the bottom line. Demand softness in some segments and high debt obligations are headwinds.
Our estimate for total service revenues is pegged at $15,458.5 million. Our estimate for equipment revenues is pegged at $3,710.4 million, indicating a 3.8% decrease year over year. Branded postpaid and prepaid ARPU are expected to witness a decline year over year.
For the September quarter, the Zacks Consensus Estimate for total revenues is pegged at $19,347 million, which indicates a decline from the year-ago quarter’s reported figure of $19,477 million. The consensus estimate for adjusted earnings per share stands at $1.75, up from 40 cents reported a year ago.
Earnings Whispers
Our proven model does not conclusively predict 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 not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -1.24%. The Most Accurate Estimate is pegged at $1.73, while the Zacks Consensus Estimate stands at $1.75. 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 #3.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Motorola Solutions, Inc. (MSI - Free Report) has an Earnings ESP of +3.58% and carries a Zacks Rank of 3. The company is set to report quarterly numbers on Nov 2.
ON Semiconductor (ON - Free Report) has an Earnings ESP of +1.00% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Oct 30.
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Will Top-Line Decline Impede T-Mobile's (TMUS) Q3 Earnings?
T-Mobile US, Inc. (TMUS - Free Report) is set to report third-quarter 2023 results on Oct 25, before the opening bell. In the last reported quarter, the company reported adjusted earnings of $1.86 per share and delivered an earnings surprise of 8.77%. The wireless service provider is expected to report a revenue contraction year over year in the third quarter, owing to intense competition and weak demand trends.
Factors at Play
In the third quarter, T-Mobile collaborated with Pixel Health to deploy a 5G hybrid network at Boston Children’s Hospital. Leveraging T-Mobile's Advanced Network Solutions, this comprehensive technology is designed to establish a robust and seamless connection across the hospital campus and ensure effective collaboration among healthcare professionals. This is the first instance when a 5G hybrid network is implemented in the healthcare sector. This is likely to have supported the top line during the quarter.
During the quarter, T-Mobile introduced a SIM-based SASE (Secure Access Service Edge) solution and network security slice to boost the cyber defense of government and business entities. The solution incorporates a zero-trust network access platform that enables organizations to establish a reliable connection between employees, various enterprise applications and resources.
TMUS launched a 5G network slicing beta with a primary focus on enhancing video calling applications. 5G network slicing will optimize the network performance per user-specific requirements. It will allow developers to test and improve the capabilities of crucial real-time communication applications. These are likely to be reflected in the upcoming results.
In the quarter under review, T-Mobile announced that SailGP, a rapidly growing global sports league, has decided to extend its partnership for seasons 4 and 5 till 2025. SailGP is aiming to enhance the fan experience with immersive views of live race events by leveraging T-Mobile's 5G hybrid mobile network technology. TMUS, as the official wireless partner of Major League Baseball, has also introduced various features at the MLB All-Star event, powered by its industry-leading 5G portfolio. These developments are likely to have had a favorable effect on third-quarter performance.
Despite management’s efforts to improve profitability and increase cash flow conversion, intense competition from other established players will likely have impacted the top line. The company’s strategy of launching low-priced service plans to attract customers and maintain competitiveness is expected to have impacted profits as well. Several promotional activities, such as free music streaming and video offers, are also affecting the bottom line. Demand softness in some segments and high debt obligations are headwinds.
Our estimate for total service revenues is pegged at $15,458.5 million. Our estimate for equipment revenues is pegged at $3,710.4 million, indicating a 3.8% decrease year over year. Branded postpaid and prepaid ARPU are expected to witness a decline year over year.
For the September quarter, the Zacks Consensus Estimate for total revenues is pegged at $19,347 million, which indicates a decline from the year-ago quarter’s reported figure of $19,477 million. The consensus estimate for adjusted earnings per share stands at $1.75, up from 40 cents reported a year ago.
Earnings Whispers
Our proven model does not conclusively predict 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 not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -1.24%. The Most Accurate Estimate is pegged at $1.73, while the Zacks Consensus Estimate stands at $1.75. 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 #3.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Alphabet Inc. (GOOGL - Free Report) is set to release quarterly numbers on Oct 24. It has an Earnings ESP of +0.89% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Motorola Solutions, Inc. (MSI - Free Report) has an Earnings ESP of +3.58% and carries a Zacks Rank of 3. The company is set to report quarterly numbers on Nov 2.
ON Semiconductor (ON - Free Report) has an Earnings ESP of +1.00% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Oct 30.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.