T-Mobile to join S&P 500
After the market closed on Tuesday, the S&P Dow Jones Indices announced that T-Mobile (TMUS) will be added to the S&P 500. T-Mobile will replace Red Hat following its acquisition by IBM (IBM). The changes will be effective before trade opens on July 15.
In response to the news, T-Mobile rose ~3.8%. Sprint (S) rose ~2.3% in after-hours trading on Tuesday.
Sprint and T-Mobile merger
In April 2018, T-Mobile and Sprint agreed to merge in an all-stock deal. The deal valued Sprint at ~$26.5 billion. The deal still has to get the Department of Justice’s approval. The Department of Justice is concerned that the proposed merger could harm the competition and raise the costs for consumers. However, Sprint and T-Mobile think that the deal could boost their customer base, eliminate duplicate work, cut costs, and widen their scale of operations.
T-Mobile’s stock returns
T-Mobile stock has risen close to 2.0% since the beginning of July. On Monday, T-Mobile closed at $75.63, which was 0.8% lower than its previous closing price, 6.5% lower than its 52-week high of $80.93, and 30.6% higher than its 52-week low of $57.89. The company’s market cap is $64.2 billion.
Based on T-Mobile’s closing price on Monday, the company reported returns of 2.0% in the last five trading days, -1.8% in the trailing one-month period, and 23.7% in the trailing 12-month period. The company has reported returns of 18.9% since the beginning of 2019.
Currently, T-Mobile stock is trading at 19.04x its fiscal 2019 estimated adjusted EPS of $3.95 based on its projected growth rate of 17.6%. The stock is trading at 16.13x its fiscal 2020 estimated adjusted EPS of $4.66 based on its projected growth rate of 18.0%, respectively. However, T-Mobile’s revenues are expected to rise 4.9% in fiscal 2019 and 4.6% in fiscal 2020.
Analysts expect T-Mobile’s revenues to see YoY (year-over-year) changes of 5.3% to $11.1 billion in the second quarter, 4.5% to $11.3 billion in the third quarter, and 4.0% to $11.9 billion in the fourth quarter. Analysts expect T-Mobile’s adjusted EPS to see YoY changes of 5.4% to $0.97 in the second quarter, 10.8% to $1.03 in the third quarter, and 24.0% to $0.93 in the fourth quarter.