A month has gone by since the last earnings report for T-Mobile (TMUS). Shares have added about 12.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is T-Mobile due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
T-Mobile's Q4 Earnings Beat Estimate on Solid Customer Growth
T-Mobile reported impressive fourth-quarter 2024 results, with both the bottom and top lines surpassing the respective Zacks Consensus Estimate. This Bellevue, WA-based wireless service provider reported a top-line expansion backed by industry-leading postpaid customer growth. T-Mobile follows a multi-layer approach to 5G, with dedicated standalone 5G deployed nationwide across 600MHz, 1.9GHz and 2.5GHz bands.
Net income in the fourth quarter was $2.98 billion or $2.57 per share, up from $2.01 billion or $1.67 per share in the year-ago quarter. The 48% year-over-year growth was primarily driven by top-line expansion. The bottom line exceeded the Zacks Consensus Estimate of $2.17.
In 2024, TMUS reported a net income of $11.3 billion or $9.66 per share compared with $8.4 billion or $6.93 per share in 2023.
Net sales during the quarter were $21.87 billion, up from $20.47 billion in the year-ago quarter, driven by solid growth in service and equipment revenues. The top line beat the consensus estimate of $21.17 billion.
In 2024, TMUS generated a total revenue of $81.4 billion, up from $78.55 billion in 2023.
Total Service revenues were $16.92 billion, up from $16.04 billion in the year-ago quarter. The segment’s net sales marginally beat our revenue estimate of $16.75 billion. The 6% year-over-year growth was primarily driven by solid demand for postpaid services. Net sales from Postpaid Services contributed $13.5 billion in revenues, up 8.3% year over year.
During the quarter, T-Mobile added 1.9 million postpaid net customers and 263,000 postpaid net accounts, both being the best in the industry. Postpaid phone net customer additions were 903,000, the best in the industry. The postpaid phone churn rate was 0.92%. High-speed Internet net customer additions were 428,000. Postpaid average revenues per account rose to $146.28 from $140.23 in the year-ago quarter.
Net sales from Prepaid services were $2.68 billion, up from $2.43 billion in the year-earlier quarter. Prepaid net customer additions were 103,000, with a churn rate of 2.85%. Wholesale and other service revenues decreased to $738 million from $1.13 billion in the year-earlier quarter. Prepaid ARPU (average revenues per user) declined to $35.49 from $37.55 in the year-ago quarter.
Equipment revenues were $4.69 billion, up from $4.17 billion in the year-ago quarter. The segment revenues beat our estimate of $4.05 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 $245 million, down from the prior-year quarter’s tally of $261 million.
Total operating expenses increased to $17.28 billion from $17 billion in the year-ago quarter. Operating income rose to $4.58 billion from $3.48 billion. T-Mobile recorded core adjusted EBITDA of $7.9 billion compared with $7.18 billion a year ago, backed by solid growth in service revenues.
In the December quarter, T-Mobile generated $5.54 billion of cash from operating activities compared with $4.85 billion in the prior-year quarter. Adjusted free cash flow was $4.08 billion, down from $4.3 billion in the year-earlier quarter. In 2024, the company generated $22.29 billion of cash from operating activities compared with $18.55 billion in the prior-year.
As of Dec 31, 2024, the company had $5.4 billion in cash and cash equivalents, with $72.7 billion of long-term debt compared with respective tallies of $5.1 billion and 69.9 billion in 2023. During the quarter, it repurchased 20.3 million shares for $4.6 billion.
For 2025, the company expects postpaid net customer additions to be between 5.5 million and 6 million. Core adjusted EBITDA is estimated to be $33.1-$33.6 billion. It anticipates cash from operating activities within $26.8-$27.5 billion. TMUS expects adjusted free cash flow in the band of $17.3-$18 billion. Capital expenditure is projected to be around $9.5 billion.
It turns out, fresh estimates have trended upward during the past month.
At this time, T-Mobile has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise T-Mobile has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
T-Mobile is part of the Zacks Wireless National industry. Over the past month, Verizon Communications (VZ), a stock from the same industry, has gained 9.6%. The company reported its results for the quarter ended December 2024 more than a month ago.
Verizon reported revenues of $35.68 billion in the last reported quarter, representing a year-over-year change of +1.6%. EPS of $1.10 for the same period compares with $1.08 a year ago.
For the current quarter, Verizon is expected to post earnings of $1.14 per share, indicating a change of -0.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Verizon. Also, the stock has a VGM Score of C.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
T-Mobile US, Inc. (TMUS) : Free Stock Analysis Report
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.