T-Mobile US Inc (Nasdaq: TMUS) stock gained 1 percent in after-hours trading after the company reported a second-quarter earnings beat and exceeded expectations for wireless subscriber growth on Wednesday. Despite the solid quarter, analysts say uncertainty surrounding T-Mobile’s proposed buyout of Sprint Corp. ( S) will continue to limit TMUS stock upside.
T-Mobile reported second-quarter adjusted earnings per share of 92 cents, beating consensus analyst estimates of 87 cents. Second-quarter revenue of $10.57 billion was up 4 percent from a year ago but missed Wall Street estimates of $10.64 billion.
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T-Mobile added 686,000 net wireless subscribers in the quarter, well above analyst forecasts of 467,000 net additions. T-Mobile also reported a record low 0.95 percent wireless subscriber churn in the second quarter, down 0.15 percent from a year ago.
Services revenue gained 7 percent to $7.9 billion. Free cash flow surged 61 percent to $774 million.
“T-Mobile just recorded its best Q2 in company history,” CEO John Legere says in a statement. “That means 21 quarters with over 1 million net adds, record-high service revenues, industry-leading postpaid phone net additions, and record-low postpaid phone churn.”
Looking ahead, T-Mobile raised its full-year guidance for branded postpaid net customer additions from 3 million to 3.6 million. T-Mobile also raised its full-year adjusted earnings before interest, taxes, depreciation and amortization guidance from $11.5 billion to $11.9 billion.
Earlier this week, T-Mobile announced a brand new $3.5 billion deal with Nokia to secure network equipment for T-Mobile’s 5G network. However, the deal which has Wall Street’s attention for the foreseeable future is T-Mobile’s proposed merger with Sprint announced back in April.
CFRA analyst Angelo Zino says there is a strong chance the Sprint deal will get blocked by regulators. “We see, at best, a 50 percent probability of obtaining regulatory approval given previous industry challenges with horizontal deals,” Zino says.
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Despite the uncertainty, he is bullish on T-Mobile’s long-term outlook with or without Sprint. “We expect competitive pressures to remain fierce, but positively view free cash flow growth potential and churn,” Zino says.
CFRA has a “buy” rating and $70 price target for TMUS stock.
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T-Mobile US Inc (TMUS) Earnings Overshadowed By Sprint Uncertainty originally appeared on usnews.com
