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T-Mobile US (TMUS) Q3 Earnings Beat Estimates, Lifts Outlook

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T-Mobile US Inc. (TMUS - Free Report) reported strong financial results in the third quarter of 2017, wherein net income outpaced the Zacks Consensus Estimate and revenues were almost in line. The company also raised its financial outlook for 2017.

GAAP net income in the reported quarter was $537 million or 63 cents per share compared with net income of $353 million or 42 cents in the year-ago quarter. Quarterly earnings per share of 63 cents were well above the Zacks Consensus Estimate of 44 cents.

T-Mobile US, Inc. Price, Consensus and EPS Surprise

 

T-Mobile US, Inc. Price, Consensus and EPS Surprise | T-Mobile US, Inc. Quote

Total revenues increased 7.7% year over year to $10,019 million in the reported quarter slightly below the Zacks Consensus Estimate of $10,022 million. Segment-wise, Service revenues were up 7% year over year to $7,629 million. Sales from Equipment totaled $2,118 million, increasing 8.7% year over year, while Other revenues were $272 million, up 21.4% year over year.

Within the Service segment, branded postpaid revenues were $4,920 million, increasing 5.9% year over year. Branded prepaid revenues were $2,376 million, up 8.9%. Wholesale revenues were $274 million, reflecting an increase of 15.1%. Roaming & other services revenues were $59 million, declining 10.6%.

Quarterly operating income was $1,323 million compared with $1,048 million in the year-ago quarter. Operating margin in the reported quarter was 13.2% compared with 11.3% in the prior-year quarter. Adjusted EBITDA was $2,822 million, up 4.9% year over year. Adjusted EBITDA margin was 28.2% compared with 28.9% in the year-ago quarter.

Cash Flow

In the third quarter of 2017, T-Mobile US generated $2,362 million of cash from operations compared with $1,740 million in the prior-year quarter. Free cash flow in the reported quarter was $921 million compared with $581 million in the year-ago quarter.

Liquidity

At the end of third-quarter 2017, T-Mobile US had $739 million of cash and cash equivalents and $15,144 million of debt outstanding compared with $5,500 million and $22,186 million, respectively, at the end of 2016. The debt-to-capitalization ratio at the end of the reported quarter was 0.42 compared with 0.54 at the end of 2016.

Subscriber Statistics and Other Metrics

As of Sep 30, 2017, total customer base of T-Mobile US was 70.731 million, increasing 2% year over year. Branded postpaid phone customers totaled 33.223 million, increasing 9.4%. Branded postpaid other customer count was 3.752 million, surging 30.9%. Branded prepaid customer count was 20.519 million, reflecting an increase of 6.5%. Wholesale customers tallied 13.237 million, declining 21.5%.

In the reported quarter, T-Mobile US added net 0.595 million branded postpaid phone customers, 0.222 million branded postpaid other customers, 0.226 million branded prepaid customers and 0.286 million wholesale customers. Total net customer addition was 1.329 million, signifying the 18th successive quarter of over 1 million net customer additions. Quarterly branded postpaid churn was 1.23% compared with 1.32% in the year-ago quarter. Branded prepaid churn was 4.25% compared with 3.82% in the year-ago quarter.

Quarterly branded postpaid phone average revenue per user (ARPU) was $46.93 compared with $48.15 in the prior-year quarter. Branded prepaid ARPU was $38.93 compared with $38.01 in the prior-year quarter. Branded postpaid average billing per user (ABPU) was $59.89 compared with $63.38 in the year-ago quarter.

Guidance

For 2017, the company anticipates adjusted EBITDA to be in the range of $10.8--$11.0 billion compared with the previous guidance range of $10.5--$10.9 billion. Capital expenditure will be in the range of $4.8--$5.1 billion. The company expects branded postpaid net customer addition to fall in the range of 3.3--3.6 million compared with the previous guidance of 3.0--3.6 million.

T-Mobile US competes with the likes of Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) and Sprint Corp. (S - Free Report) in the highly price-sensitive U.S. wireless market. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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