uploads/2020/02/AdobeStock_288416796_Editorial_Use_Only.jpeg

What to Expect from T-Mobile in Q4

By

Updated

T-Mobile (NYSE:TMUS) stock rose 0.34% on Monday and closed the trading session at $79.46. Notably, the stock was trading 6.8% below its 52-week high of $85.22 and 21.2% above its 52-week low of $65.56. At the closing price on Monday, T-Mobile had a market cap of $68.0 billion.

Article continues below advertisement

T-Mobile’s Q4 earnings

T-Mobile will report its fourth-quarter earnings results after the market closes on Thursday. For the quarter, analysts expect the company’s revenue and adjusted EPS to rise YoY (year-over-year).

For the fourth quarter, analysts expect T-Mobile to report revenue of $11.83 billion—a rise of 3.3% from $11.45 billion in the fourth quarter of 2018. The company’s revenue could increase due to growth in the wireless customer base. Analysts also expect T-Mobile to report an adjusted EPS of $0.83 in the fourth quarter of 2019—a rise of 10.7% from $0.75 in the same quarter of 2018.

Analysts expect T-Mobile’s 2019 and 2020 sales to rise by 3.8% and 5.4%, respectively. Meanwhile, they expect adjusted EPS growth in 2019 and 2020 of 18.2% and 19.1%, respectively.

In the fourth quarter, T-Mobile will likely report net additions of about 1.3 million postpaid customers. The number would include net additions of around 1.0 million postpaid phone customers. The company will likely gain around 77,000 prepaid net customers in the fourth quarter. T-Mobile would report a postpaid phone churn rate of 1.01% in the fourth quarter compared to 0.99% in the fourth quarter of 2018.

Article continues below advertisement

Third-quarter performance

In the third quarter, T-Mobile’s adjusted EPS rose 8.6% YoY to $1.01. The company’s earnings were 5.2% more than analysts’ expectations for the third quarter. T-Mobile’s adjusted net income grew significantly and reached $870 million in the third quarter compared to $795 million in the third quarter of 2018.

In the third quarter of 2019, T-Mobile reported revenue of $11.1 billion, which was lower than analysts’ consensus estimate of $11.3 billion. The company’s revenue in the third quarter rose 2.0% YoY from $10.8 billion in the third quarter of 2018. The increase was mainly driven by 6.4% YoY growth in the company’s service revenues to $8.6 billion in the third quarter from $8.1 billion in the third quarter of 2018.

In the third quarter, T-Mobile added 1.07 million net postpaid customers. The number includes net additions of 754,000 postpaid phone customers. Also, the company gained 62,000 prepaid net customers. In the third quarter, T-Mobile reported a postpaid phone churn rate of 0.89% compared to 1.02% in the third quarter of 2018.

Article continues below advertisement

Peer comparison

In the fourth quarter, AT&T (NYSE:T) reported revenues of $46.8 billion, which implies a fall of 2.4% YoY. The company reported an adjusted EPS of $0.89 in the fourth quarter, which implies a rise of 3.5% YoY. In the fourth quarter, AT&T added 229,000 postpaid phone net customers. The company also gained 8,000 prepaid net customers. In the same quarter, AT&T reported a postpaid phone churn rate of 1.07% compared to 1.00% in the fourth quarter of 2018. Read Is AT&T Stock a ‘Sell’ after Its Q4 Earnings to learn more.

In the third quarter of fiscal 2019, Sprint (NYSE:S) reported revenues of $8.08 billion—a fall of 6.1% YoY. The company reported an adjusted EPS of -$0.08 in the third quarter of fiscal 2019. Sprint is the only major mobile operator that’s struggling to generate profits. In the third quarter of fiscal 2019, Sprint lost a net of 115,000 postpaid phone customers due to intense competition in the wireless industry. The company also reported net losses of 174,000 prepaid customers. In the quarter, Sprint reported a postpaid phone churn rate of 2.06% compared to 1.84% in the third quarter of 2018. To learn more, read Sprint Fights for Survival amid T-Mobile Merger.

Article continues below advertisement

T-Mobile and Sprint merger deal

In April 2018, T-Mobile and Sprint made their merger plans public. However, the merger deal hasn’t closed. The deal faces a court challenge filed by more than a dozen state attorneys general. The plaintiffs argue that the merger would lead to higher wireless prices. Also, they think that combination would reduce competition. The antitrust court trial has ended. Currently, the wireless industry is waiting for Judge Victor Marrero’s decision. The FCC and the Department of Justice have conditionally approved the merger deal. The combined company agreed to divest certain wireless properties for $5 billion to pay-TV service provider Dish Network (NASDAQ:DISH).

According to a FierceWireless report, T-Mobile President and COO Mike Sievert said, “We know we have the right case. Right is on our side, with the merger resulting in a more competitive market with lower prices and better products.” He also said, “I think our team did a phenomenal job, making the case and backing it up with facts.”

Read T-Mobile and Sprint Merger Looks Less Likely and T-Mobile and Sprint Merger Faces Another Hurdle to learn more.

Article continues below advertisement

Analysts’ recommendations

As of Tuesday, analysts have a consensus mean target price of $91.05 on T-Mobile stock. The target price represents a 12-month return potential of 14.6% based on the closing price of $79.46 on Monday. Overall, 22 analysts follow T-Mobile as of Tuesday. Among the analysts, 17 recommend a “buy” and five recommend a “hold.” None of the analysts recommend a “sell.”

Let’s look at analysts’ ratings for T-Mobile’s peers.

  • Analysts favor a “hold” rating for AT&T. Among the 31 analysts, 16 recommend a “hold,” 13 recommend a “buy,” and two recommend a “sell.” However, CNBC’s Mad Money host Jim Cramer is bullish on the stock. During the program’s lightning round on January 29, Cramer said, “You know, I didn’t think the quarter was nearly as bad as the stock reacted. The stock’s down $1.50, yields 5.6%. I think the yield’s safe. I’m actually a buyer here.” As of Tuesday, AT&T was trading at a discount of 6.7% from its target price of $39.43.
  • Among the 17 analysts providing recommendations on Sprint stock, 12 recommend a “hold,” two recommend a “buy,” and three recommend a “sell.” As of Tuesday, Sprint was trading at a discount of 40% from its target price of $5.99.

T-Mobile’s stock performance

So far, T-Mobile stock has risen 1.3% this year. Meanwhile, the S&P 500 and the Dow Jones Industrial Average have returned 0.6% and -0.5%, respectively. In comparison, AT&T stock has fallen 5.4% year-to-date, while Sprint has fallen 17.9%. Sprint stock has fallen significantly amid merger uncertainty.

Based on Monday’s closing price, T-Mobile was trading as follows:

  • 1.3% below its 20-day moving average of $80.47
  • 1.2% above its 50-day moving average of $78.52
  • 0.4% above its 100-day moving average of $79.16

T-Mobile has a 14-day relative strength index score of 47, which suggests that the stock isn’t “overbought” or “oversold.” The stock’s 14-day MACD is -1.15, which suggests a downward trading pattern.

Advertisement

More From Market Realist