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T-Mobile: A Look at Q2 Results as It Awaits Merger Approval

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T-Mobile and Sprint merger

On Thursday, T-Mobile (TMUS) reported its second-quarter earnings results after the market closed. However, investors are awaiting more important news: whether the T-Mobile and Sprint (S) merger gets go-ahead from regulators.

On July 25, Reuters reported, “The U.S. Justice Department is negotiating with state officials to get them to support a planned settlement that would allow T-Mobile US Inc and Sprint Corp to merge by selling assets to Dish Network Corp.”

T-Mobile is still waiting for government approval for its $26.5 billion deal to acquire its competitor. The companies are seeking scale to compete against the top two US mobile carriers, Verizon and AT&T (T). Last month, 14 state attorney generals filed a lawsuit to block the merger. Read Is T-Mobile’s Merger with Sprint Imminent? to learn more. In the second-quarter investor factbook, T-Mobile stated that it expects to receive government approval for the deal in the third quarter and close the merger in the second half of 2019.

T-Mobile’s earnings and revenue

T-Mobile missed Wall Street’s revenue expectations, while its earnings beat expectations. The company’s total revenue rose 3.9% YoY to $11.0 billion in the second quarter, missing analysts’ estimate of $11.1 billion. In the second quarter of 2018, the company reported revenue of $10.6 billion. In the first quarter of 2019, it reported revenue of $11.1 billion.

T-Mobile posted adjusted EPS of $1.09 in the second quarter, up 18.5% YoY and ahead of analysts’ estimate of $0.97. Analysts expect the company’s sales and adjusted EPS to be $45.5 billion and $3.93, respectively, in 2019.

In the second quarter, T-Mobile gained 1.1 million net postpaid customers, which includes 710,000 postpaid phone customer net additions—more than analysts’ expectation of 643,000 net additions. The company also added 131,000 prepaid customers. It reported a record-low branded postpaid phone churn rate of 0.78% in the second quarter, which was lower than its rate of 0.95% in the second quarter of 2018.

Analysts’ recommendations

Of the 21 analysts covering T-Mobile stock, 18 recommend “buy,” three recommend “hold,” and none recommend “sell.” Their average 12-month target price of $83.83 implies a 4.9% rise from its July 25 closing price of $79.91. The stock was up $0.09 to $80.00 after hours on July 25. That’s 0.11% higher than the day’s close.

On a YTD basis on July 25, T-Mobile stock was up 25.6% compared to its telecommunications peers AT&T and Sprint, which were up 18.5% and 27.8%, respectively, YTD.

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