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T-Mobile: Buying the Rally before Q3 Earnings?

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T-Mobile (TMUS), the third-largest wireless carrier in the US, plans to release its third-quarter earnings results on October 28 after the market closes. T-Mobile stock is up 28.1% year-to-date. In comparison, the Dow Jones Industrial Average and the S&P 500 are up 14.9% and 20.1%, respectively.

Can T-Mobile’s third-quarter earnings lift its stock price? Let’s look at analysts’ consensus expectations for its third-quarter earnings.

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T-Mobile’s third-quarter earnings

Based on analysts’ consensus estimates, T-Mobile could report adjusted EPS of $0.96 in the third quarter. In the third quarter of 2018, the mobile operator posted adjusted EPS of $0.93. It’s beaten analysts’ adjusted EPS estimates for the last 14 quarters.

Based on analysts’ estimates, T-Mobile could post total revenue of $11.3 billion in the third quarter of 2019. This amount represents a 4.5% increase YoY (year-over-year) due to strong customer gains and a lower postpaid phone churn rate. Analysts expect T-Mobile’s wireless service revenue to rise 6.2% YoY to $8.56 billion. Analysts also expect its wireless equipment revenue to rise 0.8% YoY to $2.41 billion.

T-Mobile’s second-quarter performance

T-Mobile’s adjusted EPS of $1.09 in the second quarter beat analysts’ consensus estimate of $0.97. Its adjusted EPS came in 18.5% higher than its adjusted EPS of $0.92 in the second quarter of 2018.

The company posted revenue of $11.0 billion in the second quarter of 2019, 1.4% below the consensus estimate of $11.13 billion. Its second-quarter top line rose 3.9% YoY. The rise was the result of the company’s wireless service revenue growth from $7.9 billion in the second quarter of 2018 to $8.4 billion in the second quarter of 2019.

T-Mobile gained 710,000 postpaid phone net customers in the second quarter compared to 686,000 net additions in the second quarter of 2018. The company also gained 131,000 prepaid net subscribers. It posted a postpaid phone churn rate of 0.78% compared to 0.95% in the second quarter of 2018.

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Sprint merger deal

T-Mobile and Sprint (S) announced their $26.5 billion merger deal last year in April. However, the transaction is still pending due to a multistate lawsuit filed to stop the merger due to antitrust concerns. A court hearing on the matter will start in December. Reportedly, the merger deal has received regulatory approvals from the US Department of Justice and the Federal Communications Commission. Read The T-Mobile-Sprint Merger: The End Is Near to learn more about the deal.

Peers’ expectations

AT&T (T) also plans to release its third-quarter earnings results on October 28. Analysts expect the second-largest wireless carrier in the US to report adjusted EPS of $0.93 on revenue of $45 billion.

Sprint is likely to report its financial results for the September quarter by October’s end. Analysts expect the telecom company to report adjusted EPS of -$0.02 on revenue of $8.2 billion.

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Analysts’ recommendations

According to Wall Street analysts, T-Mobile stock has a mean price target of $88.95, suggesting an estimated upside of 9.2% for the next year. Of the 21 analysts covering T-Mobile, ten recommend “buys,” seven recommend “strong buys,” and four recommend “holds.” No analysts recommend “sells” as of October 24.

Stock performance

On October 24, T-Mobile stock rose 0.15% and closed at $81.48, with a market cap of $69.6 billion. The stock was trading 35.9% above the 52-week low of $59.96 it hit on December 26, 2018. It was also trading 4.4% below the 52-week high of $85.22 it reached on July 26. For the last 14 days, T-Mobile’s relative strength index has been 60.52, indicating that it’s neither overbought nor oversold.

T-Mobile stock has generated returns of 24.0% in the trailing-12-month period and 2.7% in the trailing-one-month period. Its share price has risen 0.5% in the trailing-five-day period.

Stay tuned to find out how T-Mobile performed in the third quarter.

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