Are T-Mobile’s Earnings Set For A Boost In Q1?

TMUS: T-Mobile US logo
T-Mobile US

T-Mobile (NASDAQ:TMUS)  is set to report its Q1 2023 results on April 27. We expect the carrier’s earnings to come in at about $1.51 per share, compared to a consensus estimate of about $1.48 per share. This would mark a growth of over 2.5x versus last year. We project that revenue will stand at about $20 billion, compared to a consensus of $19.9 billion, although this would mark a marginal decline versus last year due to potentially lower equipment sales. So, what are some of the key trends that are likely to drive earnings? See our interactive dashboard analysis on T-Mobile Earnings Preview for more details on how T-Mobile’s revenues and earnings are likely to trend for the quarter.

Now, T-Mobile’s key operating metrics have been improving across the board in recent quarters. Much of the momentum T-Mobile is witnessing is being led by its industry-leading 5G network, which is helping it to win over more customers. For perspective, over Q4 2022, the company added 927,000 postpaid phone subscribers, more than both Verizon and AT&T combined. Although T-Mobile has indicated that it expects its subscriber growth is poised to cool over 2023, guiding overall postpaid net customer additions of between 5 million and 5.5 million for the year, after adding 6.4 million customers in 2022, the company has typically beaten its own guidance. T-Mobile has also made steady inroads into the broadband market with its fixed wireless broadband offering which added an industry-leading two million subscribers last year. This business could also incrementally drive the company’s Q1 results. We also expect to see a meaningful improvement in profitability led by the decommissioning of the legacy Sprint network last year, and potentially due to lower promotional expenses driven by the company’s record low churn levels. Postpaid churn stood at just 0.88% in 2022, versus 0.98% in 2021.

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So is T-Mobile stock still a buy? T-Mobile’s valuation does appear rich versus its peers. The stock trades at about 22x forward earnings, which is well ahead of rivals AT&T and Verizon, which both trade at high single-digit multiples. That said, we think that the company’s above-average service revenue growth and potential for margin improvement still make the stock worth a look.  We value T-Mobile at about $161 per share, which is about 8% ahead of the current market price. See our analysis on T-Mobile valuation: Expensive or Cheap for more details on what’s driving our price estimate for the company. Also, check out our analysis of T-Mobile revenue for more details on the company’s key business segments and how revenues are likely to trend.

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MTD [1]
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[1] Month-to-date and year-to-date as of 4/15/2023
[2] Cumulative total returns since the end of 2016

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