T-Mobile US ’ business continued to perform well in the fourth quarter as it waits for a ruling on its long-sought merger with Sprint. The wireless operator reported earnings and revenue on Thursday evening that both beat analysts’ estimates. Shares rose in after-hours trading.
T-Mobile (ticker: TMUS) reported 87 cents in earnings per share in the fourth quarter—up 16% from a year ago and ahead of the Wall Street consensus estimate of 83 cents per share. Sales in the period were $11.9 billion, up 4% and slightly above the $11.8 billion that analysts had expected.
Adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, reached $3.2 billion, up 9% from the same period last year and ahead of the analyst consensus estimate of $3.1 billion. T-Mobile’s free cash flow jumped 15% from a year ago to $1.4 billion in the fourth quarter—its highest level ever.
In 2020, T-Mobile sees $13.7 billion to $14.0 billion in adjusted Ebitda and $5.4 billion to $5.8 billion in free cash flow. Those figures were $13.4 billion and $4.3 billion, respectively, in 2019. The company also expects to take $200 million to $300 million in merger-related costs in the first quarter.
“Our results continue to show that the Un-carrier strategy works, and it delivers for both customers and shareholders,” CEO John Legere said in a statement. “I couldn’t be more confident and excited about our future and We Won’t Stop!”
Nonetheless, T-Mobile sees its subscriber growth slowing in 2020. After adding 4.5 million postpaid subscribers last year, it expects to add 2.6 million to 3.6 million next year.
T-Mobile had preannounced its fourth-quarter subscriber numbers on Jan. 7. Its postpaid subscriber growth—referring to customers who receive a monthly bill, a closely watched metric for wireless companies—reached 1.3 million in the quarter, the company’s 27th consecutive quarter above a million. Wall Street analysts had been expecting 1.1 million net new postpaid subscribers. T-Mobile also added 77,000 prepaid subscribers in the period and ended 2019 with a total subscriber base 86 million strong.
T-Mobile has been the U.S. wireless industry’s best performer in recent years, chipping away at its larger rivals with its “un-carrier” strategy. It’s taken market share thanks to lower prices and improving network quality.
In spring 2018, T-Mobile bid to acquire its smaller rival Sprint (S). The combination of the third and fourth-largest players in the U.S. mobile phone business—after Verizon Communications (VZ) and AT&T (T)—is meant to lead to greater scale, new wireless spectrum holdings, and cost synergies that will put the new T-Mobile in a stronger position for the 5G era.
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Despite federal regulators’ support for the deal, a coalition of state attorneys general took the companies to court to block the merger. They argue that it would reduce competition and lead to higher prices for consumers. A judge’s decision could come in the next month.
Barron’s recently called T-Mobile stock a winner no matter which way the merger ruling falls. Should the deal fail, T-Mobile’s business remains solid and it can resume share buybacks, boosting its stock price. Either way, removing long-lasting deal uncertainty is a positive catalyst for the stock, which has stumbled in recent months.
Wall Street analysts are bullish on the stock: Eighty percent have a Buy or equivalent rating, while 20% recommend a Hold. No analyst rates T-Mobile a Sell. Their average target price is $92.43, about 12% above its $82.77 closing price on Thursday.
T-Mobile shares were up 0.3%, at $83.00, in after-hours trading.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com
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February 06, 2020 at 01:38PM
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T-Mobile Stock Rises After It Beats Earnings and Revenue Estimates - Barron's
"Mobile" - Google News
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