AT&T income preview: What to anticipate

A day after Verizon Communications Inc. posted earnings, AT&T Inc. will share its perspective on the state of the wireless market.

AT&T
T,
+0.31%
started to curry more favor on Wall Street last year as the company not only delivered on its subscriber narrative but also did so while making progress on profits, in the view of some analysts. The upcoming report will show how AT&T capped off the year, and how it’s faring in the current promotional environment.

See more: AT&T could ‘turn the corner’ on a key metric this year

Here’s what to expect from the report Wednesday morning.

What to expect

Earnings: The FactSet consensus calls for AT&T to post 57 cents in adjusted earnings per share, down from 59 cents in the year-before quarter. According to Estimize, which crowd sources projections from hedge funds, academics, and others, the average projection is for 61 cents. The prior year’s fourth quarter contained contributions from the WarnerMedia business, which has since been spun out.

Revenue: Analysts tracked by FactSet are looking for $31.4 billion in fourth-quarter revenue, down from $41.0 billion a year before, though those year-earlier results include the WarnerMedia contributions. The average estimate on Estimize is for $31.7 billion.

Stock movement: AT&T shares have fallen following three of the company’s last five earnings reports. The stock has declined 3.7% over the past 12 months, as the S&P 500 has fallen 8.9%.

Of the 27 analysts tracked by FactSet who cover AT&T’s stock, 11 have buy ratings, 12 have neutral ratings, and four have sell ratings, with an average price target of $20.50.

What else to watch for

In the the wake of Verizon’s
VZ,
+1.99%
report, MoffettNathanson analyst Craig Moffett is curious about what Verizon’s “more aggressive stance” meant for the rest of the wireless industry.

AT&T “hasn’t prereported subscribers or margins,” unlike T-Mobile US Inc., which preannounced subscriber metrics, “but our expectation is that they will be most directly impacted.”

See more: Verizon CEO says he won’t ‘sacrifice financials for volumes’

Evercore ISI analyst Vijay Jayant expects that AT&T will post 570,000 postpaid phone net additions for the latest quarter, with average revenue per user of $55.14 for postpaid phone subscribers. Mobility service margins could tick up 200 basis points to 52%, driven by “a combination of higher service revenue and somewhat lower upgrade activity.”

AT&T’s outlook will also be of key interest.

The company’s management “seems focused on deleveraging,” wrote Citi’s Michael Rollins. “If our expectations are incorrect and AT&T does guide closer to the previously provided EBITDA [earnings before interest, taxes, depreciation, and amortization] range of $43.5-44.5 billion, then the company could improve FCF [free-cash flow] more quickly, reduce leverage, and generate better EPS (vs. our forecasts) that would likely support a higher T share price.”

At the same time, Rollins noted that such a scenario wasn’t currently his base case.

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