T-Mobile US Inc.’s latest earnings show that the company is doing just fine on its own — even as the company’s deal for Sprint Corp. reportedly nears approval from federal regulators.
The company topped earnings expectations on Thursday, while falling short on the top line. It also crushed projections for postpaid net additions, which came in at 1.1 million, above the 884,000 FactSet consensus.
“For a long time, T-Mobile was prioritizing growth over profitability,” wrote Moffett Nathanson analyst Craig Moffett, in a note to clients. “For the second straight quarter, they’re delivering both.” He said the company showed off its best-ever margin and churn numbers in the most recent period while proving its case to him as “by far, the industry’s best growth story.”
T-Mobile shares TMUS, -0.87% were at one point on track to close at a new all-time high during Thursday’s session, before the results came out, but they turned negative toward the end of trading amid concerns about a delay in the merger approval timeline. The Wall Street Journal reported late Thursday that the Justice Department was trying to sway state attorneys general, some of whom sued to block the deal and others of whom might still have doubts about the merger despite not signing on to the suit.
The company ended up indefinitely postponing its post-earnings conference call, which was scheduled for Thursday after the closing bell. Earlier in the week, T-Mobile had pushed the call back to Thursday afternoon from Thursday morning.
T-Mobile’s latest numbers have Moffett scratching his head a bit over the urgency of the Sprint S, -2.87% deal, since the company appears to be showing solid cost controls that are driving operating leverage and margin expansion. Though he’s upbeat on T-Mobile’s stock regardless of deal approval and said he still isn’t quite sure the merger will happen, Moffett lamented the fact that T-Mobile’s business improvements are getting overlooked.
“It’s a pity that all the noise around the merger will drown out what remains one of the best growth stories in TMT,” he said. “Still, it is no doubt reassuring that if T-Mobile does have to proceed on a standalone basis, well, their future looks bright.”
Earlier in the day, he downgraded Dish Network Corp.’s DISH, -5.75% shares to sell from neutral due to his belief that the company’s likely move into the wireless industry upon completion of the T-Mobile-Sprint deal would be “very bad” for Dish investors.
T-Mobile shares have climbed 26% so far this year, while the S&P 500 SPX, -0.53% has increased 20%.
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