T-Mobile (TMUS) CEO Mike Sievert is back with more big promises for investors four years after his company's last capital markets day on Wall Street.
The company is targeting a 5% compound annual growth rate (CAGR) in services revenue through 2027, up from its current pace of about 4%, executives said at an analyst event Wednesday afternoon.
T-Mobile is also targeting $10 billion more in adjusted operating profit through 2027 compared with 2023, with a projected range of $38 billion to $39 billion.
Wall Street had expected adjusted operating profit of $37.8 billion in 2027 before the event.
The company also pledged $50 billion in dividends and share buybacks through 2027.
“We said we would combine these two companies (Sprint and T-Mobile) and complete the most successful large-scale telecommunications merger in the history of the industry, and we did that, and we unlocked value that exceeded what we promised. And now it's time to move on to the next chapter,” Sievert said on Yahoo Finance moments after the event concluded.
Sievert added: “We wanted to reveal these plans because investors want to know, after this historically successful run of the last few years, what's next.”
T-Mobile shares are up 69% over the past four years, compared with a 27% drop for Verizon (VZ) and a 1% decline for AT&T (T).
Barring an economic collapse or recession, there is good reason to believe T-Mobile could hit its new guidance.
First, the company beat all of its 2020 guidance, as adjusted operating earnings rose 32% and free cash flow improved 400%.
Consumers continue to upgrade to 5G cell phones and higher-speed home broadband, and the company has recently closed a number of key deals.
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T-Mobile's $1.35 billion deal for Mint Mobile closed in May, giving the company access to more value-conscious phone plan buyers.
The company is also looking to close deals for fiber optic networks Metronet ($4.9 billion), US Cellular ($4.4 billion) and Lumos ($950 million).
“The company (US Cellular) has always been great in smaller markets in rural areas, and that's a big growth strategy for us,” Sievert said.
If there's one unforeseen factor that will influence how T-Mobile approaches its analyst day, it will be the cost of building out the fiber-optic network. Sievert acknowledged that the company is still evaluating whether it needs to take advantage of the opportunity even further.
“While management's long track record of beating and raising expectations from an operational and financial perspective is reassuring, investors remain somewhat uncertain about the fiber strategy for now,” Evercore ISI analyst Vijay Jayant said in a note to clients.
Jayant rates T-Mobile stock with an Outperform rating.
T-Mobile's second quarter showed a telecom business still in growth mode.
Total sales rose 4% from a year earlier to $16.4 billion. The company recorded 1.3 million new customer additions, surpassing 100 million postpaid customers for the first time.
Adjusted operating earnings increased 9%, while diluted earnings per share improved 34% year over year.
For the full year, T-Mobile expects net customer additions of 5.4 million to 5.7 million. It had previously projected 5.2 million to 5.6 million.
Meeting the 2024 guidance will depend in part on demand for Apple's (AAPL) iPhone 16, which has reportedly been sluggish in terms of preorders.
“This (the outlook) could mean that the demand cycle will be a little bit longer as word of mouth spreads after people actually get the AI features later. But our sales are already higher than last year. Last year was a good year. Good iPhone launch. This year, they are higher. We are seeing a preference for the Pro over the regular edition,” Sievert said.
Brian Sozzi She is an executive editor at Yahoo Finance. Follow Sozzi on X @BrianSozzi And in LinkedInDo you have suggestions on deals, mergers, activism situations, or anything else? Email brian.sozzi@yahoofinance.com.
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