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Why T-Mobile US (TMUS) is Set to Beat this Earnings Season

Zacks

U.S. national wireless carrier T-Mobile US Inc. TMUS is slated to report first-quarter 2017 results, after the market closes on Apr 24.

Last quarter, T-Mobile US posted a positive earnings surprise of 55.17%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in all of the previous four quarters, with an average beat of 75.66%.

Over the past three months, shares of T-Mobile US registered growth of 7.5%, outperforming the Zacks categorized Wireless National industry’s loss of 4.2%.


Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that T-Mobile USis likely to beat estimates because it has the right combination of two key elements.

Zacks ESP: T-Mobile US has an Earnings ESP of +2.86%. This is because the Most Accurate estimate stands at 36 cents while the Zacks Consensus Estimate is pegged lower at 35 cents. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: T-Mobile US has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of T-Mobile US’ favorable Zacks Rank and positive ESP makes us confident of an earnings beat at the company.You can see the complete list of today’s Zacks #1 Rank stocks here.

T-Mobile US, Inc. Price and EPS Surprise

T-Mobile US, Inc. Price and EPS Surprise | T-Mobile US, Inc. Quote

What is Driving the Better-than-Expected Earnings?

We are impressed with T-Mobile US’ innovative network expansion methodologies which have helped it to substantially add consumers and compete against market behemoths like Verizon Communications Inc. VZ and AT&T Inc. T in the enterprise market.

T-Mobile US continues to gain postpaid wireless customers, which has encouraged management to raise its outlook for 2017. We also appreciate T-Mobile US’ exceptional move to eradicate all additional fees and taxes on its unlimited data plans. It seems that T-Mobile US is consumer-friendly and thinks about their benefits and facilities also, apart from its own profits.

We are also impressed with the company’s efforts to reward its stockholders with a quarterly dividend on its 5.50% Mandatory Convertible Preferred Stock. The dividend was paid on Mar 15, to holders of record as of Mar 1.

Offering the latest version of iPhone7, which requires strong wireless bandwidth, could also be a boon for the company.

On the flip side, the company operates in a highly competitive and saturated wireless market where success depends on technical superiority, quality of services and scalability. T-Mobile US also faces increased scrutiny in its working conditions, lawsuits and fines by regulatory authorities and institutional investors. The launch of several low-priced service plans for individual consumers as well as small business entities in order to gain customers have failed to generate revenues.

A Key Pick

Seagate Technology plc STX from the Zacks categorized broader Computer and Technology sector has the right combination of elements to post an earnings beat in its third-quarter 2017 release on Apr 26. Seagate Technology has an Earnings ESP of +3.77% and a Zacks Rank #2. Its earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 3.28%.

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