T-Mobile US, Inc. TMUS reported impressive second-quarter 2024 results, with both the bottom and top lines surpassing the Zacks Consensus Estimate. The Bellevue, WA-based wireless service provider reported a top line expansion backed by industry-leading postpaid customer growth. T-Mobile follows a multi-layer approach to 5G with dedicated standalone 5G deployed nationwide across 600MHz, 1.9GHz and 2.5GHz bands.
Net Income
Net income in the second quarter was $2.92 billion or $2.49 per share, up from $2.22 billion or $1.86 per share in the year-ago quarter. The 31.7% year-over-year growth was primarily driven by top-line expansion and lower operating expenses. The bottom line exceeded the Zacks Consensus Estimate of $2.27.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
T-Mobile US, Inc. price-consensus-eps-surprise-chart | T-Mobile US, Inc. Quote
Revenues
Net sales during the quarter were $19.77 billion, up from $19.2 billion in the year-ago quarter, driven by solid growth in service revenues. The top line beat the consensus estimate of $19.51 billion.
Segment Results
Total Service revenues were $16.42 billion, up from $15.73 billion in the year-ago quarter. However, the segment sales missed our revenue estimate of $16.47 billion. The 4% year-over-year growth was primarily driven by solid demand for postpaid services. Net sales from Postpaid Services contributed $12.9 million in revenues, up 7% year over year.
During the quarter, T-Mobile added 1.3 million postpaid net customers, while postpaid net account additions were 301,000, both metrics being the best in the industry. Postpaid phone net customer additions were 777,000, the best in the industry. The postpaid phone churn rate was 0.80%. High-speed Internet net customer additions were 406,000. Postpaid average revenues per account rose to $142.54 from $138.94 in the year-ago quarter.
Net sales from Prepaid services were $2.59 billion, up from $2.44 billion in the year-earlier quarter. Prepaid net customer additions were 179,000, with a churn rate of 2.54%. Wholesale and other service revenues decreased to $938 million from $1.22 billion in the year-earlier quarter. Prepaid ARPU (average revenues per user) declined to $35.94 from $37.98 in the year-ago quarter.
Equipment revenues were $3.1 billion, down from $3.16 billion in the year-ago quarter. The segment revenues beat our estimate of $2.78 billion. The decrease in the total number of devices sold, owing to lower Assurance Wireless, prepaid and postpaid upgrades, adversely impacted the top line in this vertical.
Other revenues were $237 million, down from the prior-year quarter’s tally of $289 million.
Other Details
Total operating expenses declined to $15.14 billion from $15.4 billion in the year-ago quarter. Consequently, operating income rose to $4.63 billion from $3.79 billion. T-Mobile recorded core adjusted EBITDA of $8.02 billion compared with $7.33 billion a year ago, backed by solid growth in service revenues.
Cash Flow & Liquidity
In the June quarter, T-Mobile generated $5.52 billion of cash from operating activities compared with $4.35 billion in the prior-year quarter. Adjusted free cash flow was $4.43 billion, up from $2.87 billion in the year-earlier quarter.
As of Jun 30, 2024, the company had $6.41 billion in cash and cash equivalents, with $70.2 billion of long-term debt. During the quarter, it repurchased 14 million shares for $2.3 billion.
Guidance Up
For 2024, with improved operating metrics, the company presently expects postpaid net customer additions to be between 5.4 million and 5.7 million, up from 5.2 million and 5.6 million expected earlier. Core adjusted EBITDA is estimated to be $31.5-$31.8 billion. It anticipates cash from operating activities within $21.8-$22.2 billion. TMUS expects adjusted free cash flow in the band of $16.6-17 billion, up from the $16.4-$16.9 billion estimated earlier. Capital expenditure is projected to be in the range of $8.7-$9.1 billion.
Zacks Rank & Stocks to Consider
T-Mobile currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks that investors may consider.
Telephone and Data Systems, Inc TDS, sporting a Zacks Rank #1 (Strong Buy) at present. In the last reported quarter, it delivered an earnings surprise of 145.45%. You can see the complete list of today’s Zacks #1 Rank stocks here.
TDS is a diversified telecom service provider offering wireless and wireline services in the United States. It is witnessing strong revenue growth in the TDS Telecom segment, backed by significant fiber broadband investment made in the past couple of years. The company is actively increasing the portion of fiber networks across its service address mix to deliver high-speed Internet without any signal disruption.
Motorola Solutions Inc. MSI provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure services. Motorola carries a Zacks Rank #2 (Buy) at present.
It delivered a trailing four-quarter average earnings surprise of 7.54% and has a long-term growth expectation of 9.47%. In the last reported quarter, Motorola delivered an earnings surprise of 11.51%.
Corning Incorporated GLW, sporting a Zacks Rank #1 at present, delivered a trailing four- earnings surprise of 2.17% in the last reported quarter.
Corning’s focus on innovation is driving demand across its segments and giving it pricing power. It is benefiting from solid traction in its premium smartphone cover materials and semiconductor-related products and price hikes are contributing to growth in the display business.
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