Yahoo Finance AT&T (T) vs. T-Mobile (TMUS): Which Stock Wins in Q1 Earnings?
The earnings season kicked off in full swing this week, with several companies scheduled to release quarterly numbers. Communication industry giants AT&T Inc. T and T-Mobile US, Inc. TMUS are gearing up to unveil their latest quarterly results, sparking investors’ anticipation for insights into their performance and future outlook.
Both companies topped earnings estimates in three of the last four quarters. Ahead of their upcoming reports, let's delve into the current standings of these major telecom rivals.
AT&T Overview
AT&T is set to release first-quarter 2024 results on Apr 24, before the opening bell. In the trailing four quarters, the company delivered an earnings surprise of 2.06%. In the last reported quarter, the company fell short of the Zacks Consensus Estimate by a penny.
In the to be reported quarter, AT&T is swiftly moving ahead with its network modernization efforts by deploying Ericsson Cloud RAN technology on its commercial 5G network. It introduced a fixed wireless service called AT&T Internet Air, designed to provide Internet connectivity for businesses in remote locations.
FirstNet Authority disclosed its plans to invest $6.3 billion through its network contract with AT&T and an additional $2 billion for ongoing investments in coverage enhancements for public safety. These developments are expected to have boosted the top line during the quarter.
Management is placing strong emphasis on reducing operating expenses and improving efficiency. It is focused on expanding 5G and fiber connectivity, along with expanded reach of software-based entertainment platforms. However, fierce competition from other major players such as TMUS and Verizon, combined with macroeconomic headwinds and inflationary pressure, is hurting the top line.
For the March quarter, our estimate for revenues from the Mobility Business is pegged at $21.44 billion, implying 4.2% year-over-year growth. Net sales from Consumer Wireline are pegged at $3.37 billion, implying a 3.9% year-over-year improvement. Revenues from Business Wireline are estimated at $5.18 billion, down 2.9% year over year. Postpaid net addition is expected to decline by 4.3% year over year.
As of Dec 31, 2023, AT&T had $6.72 billion of cash and cash equivalents with long-term debt of $127.85 billion compared with respective tallies of $7.54 billion and $126.7 billion by the end of third-quarter 2023. This shows that while the debt burden has increased, the cash position has decreased on a sequential basis. The company currently has a debt-to-capital ratio of 0.54 compared with 0.56 for the sub-industry.
TMUS Overview
T-Mobile is set to report first-quarter 2024 results on Apr 25, after the closing bell. In the trailing four quarters, the company delivered an earnings surprise of 1.33%. In the last reported quarter, the company fell short of the Zacks Consensus Estimate of $1.90.
In the quarter under review, the company inked a 10-year agreement with department of Veteran Affairs to provide seamless communications and boost healthcare operations spanning 15 locations across Puerto Rico and the U.S. Virgin Islands. T-Mobile joined forces with the leading AI-powered customer intelligence platform Dialpad to launch Ai Recaps, an AI-enabled communication solution designed to revolutionize professional interactions across industries. These developments will likely have a positive impact on first-quarter financial results.
T-Mobile continues to boast a leadership position in the 5G market. Its 5G coverage exceeds 330 million people, a greater footprint than AT&T and Verizon combined. The company is benefiting from industry-leading postpaid customer growth with a record-low churn rate. However, aggressive competition in the U.S. wireless industry could limit the company’s ability to attract and retain customers and may adversely affect its operating results. Management’s strategy of introducing several promotional activities and low-priced service plans for consumers strains margins.
For the March quarter, our estimate for Branded Postpaid revenues is pegged at $12.7 billion, implying 7.2% year-over-year growth. Branded Prepaid revenues are estimated at $2.4 billion, suggesting a marginal decline from $2.41 billion in the year-ago quarter. Despite a sequential decline, postpaid net customers are expected to grow 0.9% year over year.
As of Dec 31, 2023, the company had $5.13 billion in cash and cash equivalents with $69.9 billion of long-term debt compared to respective tallies of $5.03 billion and $70.36 billion in the third quarter of 2023. It currently has a debt-to-capital ratio of 0.54 compared with 0.56 of the sub-industry.
Overall Expectations
For the first quarter of 2024, the Zacks Consensus Estimate for T-Mobile’s total revenues is pegged at $19.69 billion, which indicates an improvement from the year-ago quarter’s reported figure of $19.63 billion. Meanwhile, the consensus mark for AT&T’s total revenues stands at $30.66 billion, suggesting 1.73% year-over-year growth.
The Zacks Consensus Estimate for TMUS’s EPS indicates year-over-year growth of 19.62%. The consensus mark for AT&T’s EPS stands at 53 cents, indicating an 11.67% year-over-year decline.
Earnings Whispers
Our quantitative model suggests that the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
TMUS has an Earnings ESP of -4.03% and carries a Zacks Rank #3. The Most Accurate Estimate is pegged at $1.82, while the Zacks Consensus Estimate stands at $1.89.
T-Mobile US, Inc. Price and EPS Surprise
T-Mobile US, Inc. price-eps-surprise | T-Mobile US, Inc. Quote
On the other hand, AT&T has an Earnings ESP of -0.39% and a Zacks Rank #3. Hence, the earnings beat is not certain for either of the enterprises.
AT&T Inc. Price and EPS Surprise
AT&T Inc. price-eps-surprise | AT&T Inc. Quote
Stock Performance
TMUS has surged 12% in the past year, while shares of AT&T have lost 6.1%. T-Mobile has outperformed the industry, which saw growth of 3.3% in the past year.
Image Source: Zacks Investment Research
Conclusion
When considering these two major players in the communication industry, TMUS appears to be relatively better placed ahead of first-quarter earnings. With broader coverage compared to AT&T, growing demand for postpaid services, and ongoing advancements in 5G use cases, TMUS seems to have a competitive edge.
Other Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Qualcomm Incorporated QCOM is set to release quarterly numbers on May 1. It has an Earnings ESP of +0.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
United States Cellular Corporation USM is scheduled to report quarterly numbers on May 2. It has an Earnings ESP of +36.36% and sports Zacks Rank of 1.
The Earnings ESP for Silicon Motion Technology SIMO is +5.96% and it has a Zacks Rank of 2. The company is scheduled to report quarterly numbers on May 2.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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