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T-Mobile Shares Jump After Solid Earnings, Robust 2021 Subscriber Outlook

"Perception is absolutely catching up to reality that T-Mobile is the clear 5G leader, with 5G quickly becoming one of the top things that customers say they're looking for in their next wireless provider," said CEO Mike Sievert.

T-Mobile US  (TMUS) - Get T-Mobile US Inc. Report shares jumped higher Wednesday after the country's third-largest wireless carrier posted stronger-than-expected first quarter earnings and boosted its full-year outlook for adding new users that pay a monthly bill as it ramps-up its 5G challenge to Verizon  (VZ) - Get Verizon Communications Inc. Report and AT&T  (T) - Get AT&T Inc. Report.

T-Mobile said diluted earnings for the three months ending in March were pegged at $74 cents per share, down 32.7% from the same period last year but well ahead of the Street consensus forecast of 57 cents per share. Group revenues also impressed, rising 78% to a forecast-beating $19.8 billion, thanks in part to postpaid net additions of 1.2 million, including 784,000 new phone customers

Average revenue per postpaid user was up 3.25% to $47.30, T-Mobile said, a figure its expects will be the "low watermark for this year" and rise about first quarter levels for the remainder of 2021.

Looking into the 2021 financial year, T-Mobile said it sees the postpaid additions number rising to between 4.4 million and 4.9 million and free cash flow of between $5.1 billion and $5.5 billion.

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"It's another beat-and-raise quarter for T-Mobile," CEO Mike Sievert told investors on a conference call late Tuesday. "We beat expectations with continued customer growth, increased profitability and rapid unlocking of merger synergies, which enables us to raise guidance for 2021 just one quarter into the year, something Verizon and AT&T were not confident enough to do despite all of their happy talk on their calls." 

"Mobile led the industry in net add growth yet again, building on our existing fame for superior value and customer service while making big strides in network perception to fuel our momentum," he added. "And we did it while simultaneously delivering better-than-expected service revenues and core adjusted EBITDA." 

T-Mobile shares were marked 3.2% higher in early trading Wednesday to change hands at $132.40 each, a move that would trim the stock's year-to-date decline to around 2.5%.

"Based on fist quarter results, T-Mobile US is gaining share in postpaid phone with its premium network quality, pricing, and service," said Oppenheimer analyst Timothy Horan, who carries an 'outperform' rating with a $190 price target on the stock. "T-Mobile is taking advantage of its superior 5G network to take share in home broadband and enterprise, where it now has low relative market share to Verizon and AT&T."

"T-Mobile US is executing very well and is ahead of its competition on network builds. It delivered leading postpaid phone net additions on leading phone churn even though more Sprint customer traffic migrated to its network," Horan added. "Home broadband and enterprise are still in early days but represent upside to service rev. Network quality is improving, which we expect will continue."