T-Mobile (TMUS) CEO Mike Sievert is back with more big promises to investors, four years after his company’s last trading day on Wall Street.
The company is targeting compound annual growth rate (CAGR) of 5% in services revenue through 2027, up from the current pace of about 4%, executives said at an analyst meeting on Wednesday afternoon.
T-Mobile also targets adjusted operating profit of $10 billion more through 2027 compared to 2023, with an expected range of $38 billion to $39 billion.
Before the event, Wall Street expected adjusted operating profit of $37.8 billion in 2027.
The company also pledged $50 billion in dividends and share buybacks through 2027.
“We said we would merge these two companies [Sprint and T-Mobile] and complete the most successful merger of scaled telecoms in the history of the industry, and we did that, and we unlocked the value that we promised. And now it’s time for the next chapter,” Sievert said on Yahoo Finance moments after the event ended.
Sievert added: “We wanted to announce these plans because investors want to know what the next step is after the historically successful period of recent years.”
T-Mobile shares have risen 69% over the past four years, compared to a 27% decline 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 can meet its new targets.
First, the company beat expectations for 2020, as adjusted operating profit increased 32% and free cash flow improved 400%.
Consumers are increasingly switching to 5G phones and faster home broadband, and the company has recently closed a number of major deals.
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In May, T-Mobile closed its $1.35 billion deal with Mint Mobile, giving the company access to more budget-conscious phone plan buyers.
The company is also looking to close deals for fiber-optic companies Metronet ($4.9 billion), US Cellular ($4.4 billion) and Lumos ($950 million).
“The company [US Cellular] has always been good in smaller markets in rural areas, and that is an important growth strategy for us,” Sievert said.
If there’s a wild card in how T-Mobile’s analyst day will be consumed, it’s the cost of building out its fiber network. Sievert acknowledged that the company is still assessing whether to pursue the opportunity further.
“While management is confident operationally and financially with its long track record of beats and raises, investors remain somewhat uncertain about the fiber strategy for now,” Evercore ISI analyst Vijay Jayant said in a note to clients.
Jayant gives T-Mobile an Outperform rating.
T-Mobile’s second quarter showed that the telecom division is still in the growth phase.
Total revenue rose 4% from the previous year to $16.4 billion. The company added 1.3 million net customers, surpassing 100 million postpaid customers for the first time.
Adjusted operating profit increased 9%, while diluted earnings per share increased 34% compared to last year.
For the full year, T-Mobile expects net customer additions of 5.4 million to 5.7 million. It previously forecast 5.2 million to 5.6 million.
Whether the 2024 forecast is met will depend partly on demand for Apple’s (AAPL) iPhone 16, which has reportedly been slow to get pre-orders off to a bad start.
“It [the outlook] “It could mean that the demand cycle will be a little bit longer, as word of mouth increases 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’re higher. We see a preference for the Pro over the regular edition,” Sievert said.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi and further LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com.
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