Deutsche Telekom shares advance on earnings beat and raised guidance

Deutsche Telekom raised its 2021 profit guidance on Wednesday after a strong showing by its businesses in the United States and Europe in the first quarter, with group revenue and core profit beating market estimates.

Shares rallied by 2% on the results and guidance, which analysts said represented a show of strength at Deutsche Telekom’s operations outside the United States despite the COVID-19 pandemic.

“We are sustaining momentum and continuing our successful growth story,” said Chief Financial Officer Christian Illek. “Our customer numbers and key financial metrics are on track on both sides of the Atlantic.”

Jefferies analyst Ulrich Rathe said the quarterly report “bodes well” for Deutsche Telekom’s forthcoming capital markets presentation over May 20-21, when management is due to present new mid-term targets.

Following raised guidance from U.S. business T-Mobile, which has already reported results, Deutsche Telekom also nudged up the 2021 outlook for profit and cash flow at its European operations.

It now expects group adjusted earnings before interest, tax, depreciation and amortisation after leases (EBITDA AL) to exceed 37 billion euros ($44.8 billion) and free cash flow after leases to exceed 8 billion euros.

Previously core profit had been forecast at about 37 billion euros and free cash flow at around 8 billion euros.

First-quarter revenue increased by 32.3% to 26.39 billion euros, beating consensus estimates of 25.595 billion euros in a poll of analysts published by the company.

EBITDA AL rose 41.3% to 9.245 billion euros, also topping market expectations.

After stripping out one-off gains from T-Mobile’s acquisition of smaller U.S. rival Sprint, which closed a little more than a year ago, revenue grew by 7.1% in the quarter and adjusted EBITDA AL by 8.3% on an organic basis.

The one-off effects will drop out of the equation from the second quarter.

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