T-Mobile US, Inc. TMUS – the fourth largest national telecom carrier in the U.S. – is slated to release its first-quarter 2015 results on Apr 28, before the opening bell.
Last quarter, the company had delivered a 33.33% positive earnings surprise. The company has surpassed the Zacks Consensus Estimate in two of the last four quarters, with an average miss of 94.45%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that T-Mobile is likely to beat earnings because it has the perfect combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +14.29%. This is because the Most Accurate estimate stands at a loss of 6 cents, whereas the Zacks Consensus Estimate is pegged at a loss of 7 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: T-Mobile currently has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of T-Mobile’s Zacks Rank #3 and +14.29% ESP makes us reasonably confident of a positive earnings beat at the company.
What is Driving the Better-than-Expected Earnings?
T-Mobile has started deploying LTE network on its 700 MHz spectrum holdings to enhance its service quality outside major urban areas. Notably, recent license wins in the AWS-3 spectrum auction should further help the company in its plans for network coverage expansion.
Moreover, despite stiff competition, the company’s unique “Un-Carrier” business model has gained immense popularity. Additionally, T-Mobile recently launched several low-priced service plans for individual consumers as well as business entities. We believe such low-cost plans will lure subscribers to T-Mobile from its competitors, particularly those who are cost-sensitive.
Stocks to Consider
T-Mobile is not the only company looking up this earnings season. Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
Skyworks Solutions Inc. SWKS, with earnings ESP of +0.97% and a Zacks Rank #2.
Charter Communications, Inc. CHTR, with earnings ESP of +411.11% and a Zacks Rank #3.
STMicroelectronics NV STM, with earnings ESP of +100.00% and a Zacks Rank #3.
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