T-Mobile, US, Inc. TMUS reported impressive third-quarter 2024 results, with both the bottom and top lines surpassing the respective Zacks Consensus Estimate. The Bellevue, WA-based wireless service provider reported a top-line expansion backed by industry-leading postpaid customer growth.
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T-Mobile follows a multi-layer approach to 5G, with dedicated standalone 5G deployed nationwide across 600MHz, 1.9GHz and 2.5GHz bands. Strong growth in free cash flow is a positive.
Net Income
Net income in the third quarter was $3.1 billion or $2.61 per share, up from $2.14 billion or $1.82 per share in the year-ago quarter. The 42.8% year-over-year growth was primarily driven by top-line expansion and lower operating expenses. The bottom line exceeded the Zacks Consensus Estimate of $2.37.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
T-Mobile US, Inc. price-consensus-eps-surprise-chart | T-Mobile US, Inc. Quote
Revenues
Net sales during the quarter were $20.16 billion, up from $19.25 billion in the year-ago quarter, driven by solid growth in service revenues. The top line beat the consensus estimate of $19.86 billion.
Segment Results
Total Service revenues were $16.72 billion, up from $15.9 billion in the year-ago quarter. However, the segment sales marginally missed our revenue estimate of $16.73 billion. The 5.1% year-over-year growth was primarily driven by solid demand for postpaid services. Net sales from Postpaid Services contributed $13.3 million in revenues, up 8% year over year.
During the quarter, T-Mobile added 1.6 million postpaid net customers and 315,000 postpaid net account additions, both being the best in the industry. Postpaid phone net customer additions were 865,000, the best in the industry. The postpaid phone churn rate was 0.86%. High-speed Internet net customer additions were 415,000. Postpaid average revenues per account rose to $145.60 from $139.83 in the year-ago quarter.
Net sales from Prepaid services were $2.71 billion, up from $2.47 billion in the year-earlier quarter. Prepaid net customer additions were 24,000, with a churn rate of 2.78%. Wholesale and other service revenues decreased to $701 million from $1.15 billion in the year-earlier quarter. Prepaid ARPU (average revenues per user) declined to $35.81 from $38.18 in the year-ago quarter.
Equipment revenues were $3.2 billion, up from $3.1 billion in the year-ago quarter. The segment revenues beat our estimate of $2.86 billion. The improvement was primarily attributed to a higher average revenue per device sold, owing to an increase in the high-end phone mix.
Other revenues were $230 million, down from the prior-year quarter’s tally of $262 million.
Other Details
Total operating expenses declined to $15.36 billion from $15.65 billion in the year-ago quarter. Consequently, operating income rose to $4.79 billion from $3.59 billion. T-Mobile recorded core adjusted EBITDA of $8.22 billion compared with $7.54 billion a year ago, backed by solid growth in service revenues.
Cash Flow & Liquidity
In the September quarter, T-Mobile generated $6.13 billion of cash from operating activities compared with $5.29 billion in the prior-year quarter. Adjusted free cash flow was $5.16 billion, up from $4 billion in the year-earlier quarter.
As of Sept. 30, 2024, the company had $9.75 billion in cash and cash equivalents, with $72.52 billion of long-term debt. During the quarter, it repurchased 3.2 million shares for $644 million.
Guidance Up
For 2024, with improved operating metrics, the company presently expects postpaid net customer additions to be between 5.6 million and 5.8 million, up from 5.4 million and 5.7 million expected earlier. Core adjusted EBITDA is estimated to be $31.6-$31.8 billion. It anticipates cash from operating activities within $22-$22.3 billion compared with $21.8-$22.2 billion estimated earlier. TMUS expects adjusted free cash flow in the band of $16.7-$17 billion. Capital expenditure is projected to be in the range of $8.8-$9 billion.
Zacks Rank & Stocks to Consider
T-Mobile currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks that investors may consider.
Zillow Group, Inc. ZG sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last reported quarter, it delivered an earnings surprise of 25.81%. ZG delivered an earnings surprise of 37.41%, on average, in the trailing four quarters. The company is witnessing solid momentum in rental revenues, driven by growth in multi and single-family listings, which is a positive factor.
Ubiquiti Inc. UI sports a Zacks Rank of 1 at present. The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises.
Its excellent global business model, which is flexible and adaptable to evolving changes in markets, helps UI overcome challenges and maximize growth. The company’s effective management of its strong global network of more than 100 distributors and master resellers improved UI’s visibility for future demand and inventory management techniques.
Workday Inc. WDAY carries a Zacks Rank of 2 (Buy) at present. In the last reported quarter, it delivered an earnings surprise of 7.36%.
WDAY is a leading provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system, making it easier for organizations to provide analytical insights and decision support.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>Workday, Inc. (WDAY) : Free Stock Analysis Report
T-Mobile US, Inc. (TMUS) : Free Stock Analysis Report
Zillow Group, Inc. (ZG) : Free Stock Analysis Report
Ubiquiti Inc. (UI) : Free Stock Analysis Report
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