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Why T-Mobile US Stock Popped After Earnings

By Rich Smith - May 5, 2021 at 12:36PM

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T-Mobile didn't just report earnings yesterday. It bragged about them.

What happened

Shares of mobile phone service provider T-Mobile US (TMUS -0.74%) jumped 5% in early morning trading Wednesday in response to earnings news released right after market close Tuesday afternoon.

Analysts had forecast that T-Mobile would earn $0.57 per share on $18.9 billion in revenue for its first fiscal quarter of 2021. In fact, T-Mobile reported earnings of $0.74 per share and sales of $19.8 billion.  

Rising blue and orange stock chart

Image source: Getty Images.

So what

There's merely "reporting" earnings, and then there's bragging -- and what T-Mobile said yesterday verged on the latter.  

T-Mobile didn't just add 1.2 million net postpaid (i.e., under contract) customers last quarter, but had the "best in industry" number of customer additions. It didn't just add 1.4 million net customers total, but had the "best in industry" figure there, too.

T-Mobile's revenue jumped 78% year over year, as did the company's free cash flow ($1.3 billion for the quarter). Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 86% (although GAAP net income declined 33%).

Now what

T-Mobile stock remains up 4.8% as of 12:22 p.m. EDT, and part of the reason for that is the strong results noted above. But another part of the reason T-Mobile shares are doing so well is the company's guidance for the rest of this year.

Citing "meaningful progress on integration activities" after its merger with Sprint, T-Mobile management advised that it now expects to achieve "merger synergies" (i.e., cost reductions) of "$2.8 billion to $3.1 billion in 2021," about 4% better than the $2.7 billion to $3 billion previously projected. It expects net customer additions for the year to reach between 4.4 million and 4.9 million, also ahead of previous projections.

And while management was hesitant to commit to a net income number, it revised its forecast for full-year free cash flow higher, to anywhere from $5.1 billion to $5.5 billion.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.

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