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Will T-Mobile’s Earnings Grow in 1Q16?

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T-Mobile’s earnings in 1Q16

T-Mobile (TMUS) is expected to report its 1Q16 results on April 26, 2016. According to Wall Street analysts, on an adjusted basis, T-Mobile’s earnings are expected to grow significantly YoY (year-over-year) in 1Q16.

The wireless carrier’s adjusted EPS (or earnings per share) is expected to be ~$0.11 in 1Q16 compared to the company’s adjusted EPS of ~$0.01 in 1Q15. The YoY growth in this metric is expected to be driven by YoY expansion in the telecom company’s margins.

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Now let us look at T-Mobile’s adjusted earnings versus analyst consensus estimates in the recent quarters. As we can see in the above bar chart, Wall Street’s estimates for the telecom company’s adjusted earnings have been conservative in 1Q15, 2Q15, and 4Q15. However, the company’s earnings did surprise analysts negatively during 3Q15.

T-Mobile’s core operating profitability in 1Q16

Wall Street expects T-Mobile’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin to strengthen YoY in 1Q16. According to analysts’ consensus, the wireless carrier’s adjusted EBITDA margin is expected to be ~24.8% in 1Q16 compared to ~17.8% in 1Q15. Earlier in 4Q15, the carrier’s EBITDA margins were ~27.6% compared with ~21.5% in 4Q14.

For a diversified exposure to telecom companies in the US, you may consider investing in the iShares Russell 1000 Value ETF (IWD). The ETF held a total of ~2.7% in AT&T (T), Verizon (VZ), Level 3 Communications (LVLT), CenturyLink (CTL), and T-Mobile at the end of March 2016.

In this series, we will look at the expectations for some operating and financial metrics of T-Mobile during 1Q16.

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