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Why Is T-Mobile (TMUS) Up 4.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for T-Mobile (TMUS - Free Report) . Shares have added about 4.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is T-Mobile due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
T-Mobile reported mixed third-quarter 2023 results, with the bottom line beating the Zacks Consensus Estimate but the top line missing the same. The Bellevue, WA-based wireless service providers reported a top-line contraction year over year, owing to declining revenues from equipment sales and prepaid services. However, the company witnessed an industry-leading postpaid customer growth with a record low postpaid phone churn rate. TMUS also achieved its full-year target of covering 300 million Americans with ultra capacity 5G network two months before its targeted deadline.
Net Income
Net income in the third quarter stood at $2,142 million or $1.82 per share, up from $508 million or 40 cents per share in the year-ago quarter. The year-over-year growth despite lower revenues was primarily driven by lower operating expenses. The bottom line surpassed the Zack Consensus Estimate of $1.75.
Revenues
Net sales during the quarter were $19,252 million, down from $19,477 million in the year-ago quarter. Declining equipment revenues impeded the top line during the quarter. The top line missed Zacks Consensus Estimate of $19,347 million.
Segment Results
Total Service revenues were $15,914 million, up from $15,361 million in the year-ago quarter. Net sales surpassed our revenue estimate of $15,458.5 million. The 4% year-over-year growth was primarily driven by improvement in postpaid revenues. Net sales from Postpaid Services contributed $12,288 million in revenues, up 6% year over year.
During the quarter, T-Mobile added 1.2 million postpaid net customers, while postpaid net account additions were a staggering 386,000, both metrics being the best in the industry. Postpaid phone net customer additions were 850,000, with a record low churn rate of 0.87%. High-speed Internet net customer additions were 557,000. Postpaid average revenues per account rose to $139.83 from $137.49 in the year-ago quarter.
Net sales from Prepaid services were $2,473 million, marginally down from $2,484 million in the prior-year quarter. Prepaid net customer additions declined year over year, owing to moderation of industry growth and fewer high-speed Internet net additions year over year. Prepaid churn rate decreased to 2.81% from 2.88% in the year-ago quarter. Wholesale and other service revenues decreased to $1,153 million from $1,329 million in the year-earlier quarter. Prepaid ARPU declined to $38.18 from $38.86 in the year-ago quarter.
Equipment revenues were $3,076 million, down 20% year over year. The top line fell short of our revenue estimate of $3,710.4 million. Sales drop of devices and accessories, owing to lower postpaid upgrades and prepaid sales and longer device lifecycles, impacted the top line in this segment.
Other revenues were $262 million, relatively flat compared with the prior-year quarter’s tally of $261 million.
Other Details
Total operating expenses decreased to $15,656 million from $18,196 million in the year-ago quarter. Consequently, operating income rose to $3,596 million from $1,281 million. T-Mobile recorded a core adjusted EBITDA of $7,547 million compared with $6,728 million a year ago driven by greater service revenues, lower cost of services and equipment sales.
Cash Flow & Liquidity
In the September quarter, T-Mobile generated $5,294 million of cash from operating activities compared with $4,391 million in the prior-year quarter. Adjusted free cash flow was $4,003 million, up from $2,065 million due to an improvement in operating cash flow and lower cash purchases of property and equipment.
As of Sep 30, 2023, the company had $5,030 million in cash and cash equivalents, with $70,365 million of long-term debt. During the quarter, it repurchased 19.3 million shares for $2.7 billion.
Outlook
T-Mobile has raised its guidance for 2023. The company currently expects postpaid net customer additions between 5.7 million and 5.9 million, up from 5.6 million and 5.9 million expected earlier. Core adjusted EBITDA is estimated to be between $29 billion and $29.2 billion, up from $28.9-$29.2 billion. It anticipates cash from operating activities within $18.3-$18.5 billion, up from $18-18.3 billion.
TMUS upgraded the lower range of adjusted free cash flow from $13.2-$13.6 billion to $13.4-$13.6 billion. It also raised the estimated range of capital expenditure to $9.6-9.8 billion from $9.5-9.7 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, T-Mobile has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, T-Mobile has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
T-Mobile belongs to the Zacks Wireless National industry. Another stock from the same industry, Verizon Communications (VZ - Free Report) , has gained 8.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Verizon reported revenues of $33.34 billion in the last reported quarter, representing a year-over-year change of -2.6%. EPS of $1.22 for the same period compares with $1.32 a year ago.
For the current quarter, Verizon is expected to post earnings of $1.08 per share, indicating a change of -9.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Verizon. Also, the stock has a VGM Score of C.
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Why Is T-Mobile (TMUS) Up 4.2% Since Last Earnings Report?
It has been about a month since the last earnings report for T-Mobile (TMUS - Free Report) . Shares have added about 4.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is T-Mobile due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
T-Mobile Q3 Earnings Beat Estimates, Guidance Raised
T-Mobile reported mixed third-quarter 2023 results, with the bottom line beating the Zacks Consensus Estimate but the top line missing the same. The Bellevue, WA-based wireless service providers reported a top-line contraction year over year, owing to declining revenues from equipment sales and prepaid services. However, the company witnessed an industry-leading postpaid customer growth with a record low postpaid phone churn rate. TMUS also achieved its full-year target of covering 300 million Americans with ultra capacity 5G network two months before its targeted deadline.
Net Income
Net income in the third quarter stood at $2,142 million or $1.82 per share, up from $508 million or 40 cents per share in the year-ago quarter. The year-over-year growth despite lower revenues was primarily driven by lower operating expenses. The bottom line surpassed the Zack Consensus Estimate of $1.75.
Revenues
Net sales during the quarter were $19,252 million, down from $19,477 million in the year-ago quarter. Declining equipment revenues impeded the top line during the quarter. The top line missed Zacks Consensus Estimate of $19,347 million.
Segment Results
Total Service revenues were $15,914 million, up from $15,361 million in the year-ago quarter. Net sales surpassed our revenue estimate of $15,458.5 million. The 4% year-over-year growth was primarily driven by improvement in postpaid revenues. Net sales from Postpaid Services contributed $12,288 million in revenues, up 6% year over year.
During the quarter, T-Mobile added 1.2 million postpaid net customers, while postpaid net account additions were a staggering 386,000, both metrics being the best in the industry. Postpaid phone net customer additions were 850,000, with a record low churn rate of 0.87%. High-speed Internet net customer additions were 557,000. Postpaid average revenues per account rose to $139.83 from $137.49 in the year-ago quarter.
Net sales from Prepaid services were $2,473 million, marginally down from $2,484 million in the prior-year quarter. Prepaid net customer additions declined year over year, owing to moderation of industry growth and fewer high-speed Internet net additions year over year. Prepaid churn rate decreased to 2.81% from 2.88% in the year-ago quarter. Wholesale and other service revenues decreased to $1,153 million from $1,329 million in the year-earlier quarter. Prepaid ARPU declined to $38.18 from $38.86 in the year-ago quarter.
Equipment revenues were $3,076 million, down 20% year over year. The top line fell short of our revenue estimate of $3,710.4 million. Sales drop of devices and accessories, owing to lower postpaid upgrades and prepaid sales and longer device lifecycles, impacted the top line in this segment.
Other revenues were $262 million, relatively flat compared with the prior-year quarter’s tally of $261 million.
Other Details
Total operating expenses decreased to $15,656 million from $18,196 million in the year-ago quarter. Consequently, operating income rose to $3,596 million from $1,281 million. T-Mobile recorded a core adjusted EBITDA of $7,547 million compared with $6,728 million a year ago driven by greater service revenues, lower cost of services and equipment sales.
Cash Flow & Liquidity
In the September quarter, T-Mobile generated $5,294 million of cash from operating activities compared with $4,391 million in the prior-year quarter. Adjusted free cash flow was $4,003 million, up from $2,065 million due to an improvement in operating cash flow and lower cash purchases of property and equipment.
As of Sep 30, 2023, the company had $5,030 million in cash and cash equivalents, with $70,365 million of long-term debt. During the quarter, it repurchased 19.3 million shares for $2.7 billion.
Outlook
T-Mobile has raised its guidance for 2023. The company currently expects postpaid net customer additions between 5.7 million and 5.9 million, up from 5.6 million and 5.9 million expected earlier. Core adjusted EBITDA is estimated to be between $29 billion and $29.2 billion, up from $28.9-$29.2 billion. It anticipates cash from operating activities within $18.3-$18.5 billion, up from $18-18.3 billion.
TMUS upgraded the lower range of adjusted free cash flow from $13.2-$13.6 billion to $13.4-$13.6 billion. It also raised the estimated range of capital expenditure to $9.6-9.8 billion from $9.5-9.7 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, T-Mobile has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, T-Mobile has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
T-Mobile belongs to the Zacks Wireless National industry. Another stock from the same industry, Verizon Communications (VZ - Free Report) , has gained 8.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Verizon reported revenues of $33.34 billion in the last reported quarter, representing a year-over-year change of -2.6%. EPS of $1.22 for the same period compares with $1.32 a year ago.
For the current quarter, Verizon is expected to post earnings of $1.08 per share, indicating a change of -9.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Verizon. Also, the stock has a VGM Score of C.