AT&T’s Q4 Profit Likely Fell, But Stock Remains Unfazed

Key Takeaways

  • AT&T’s subscriber development possible moderated within the fourth quarter, slicing into income and earnings.
  • Traders, although, pushed AT&T’s replenish 22% within the newest quarter, simply outperforming the broader telecommunications sector.
  • AT&T subscriber development continues benefiting from HBO Max’s reputation.

Fourth-quarter earnings at AT&T Inc. (T), the telecommunications agency that traces its lineage to phone inventor Alexander Graham Bell, in all probability fell by a fifth, concluding a yr through which its nonetheless sturdy subscriber development moderated whereas its inventory defied broader market losses.

Web revenue at AT&T, now centered on wi-fi and broadband providers, fell a projected 21% to $4 billion, or 56 cents per share, in accordance with estimates from Seen Alpha. Income in all probability dropped 23% to $31.4 billion. In the identical interval a yr in the past, the corporate earned $5 billion, or 78 cents a share, on income of $41 billion.

AT&T Key Stats
   This fall 2022 (est.)  This fall 2021  This fall 2020
 Adjusted EPS  $0.56  $0.78  $0.75
 Income  $31.4B  $41.0B  $45.7B
Web wi-fi subscriber acquire/(loss)  (27.8%)  4.6%  810.4%

Supply: Seen Alpha

AT&T’s declining subscriber development partly displays a leveling off from the explosive development it skilled throughout the onset of the pandemic, when the corporate started rolling out 5G providers and launched HBO Max as its new streaming service. Since then, AT&T has spun off its WarnerMedia unit, together with HBO Max, however retains the power to bundle the service in choices to wi-fi clients.”

AT&T’s inventory surged 22% within the fourth quarter and 6% for all 2022, defying broader world monetary market misery. In an unsure financial surroundings, the corporate’s annual dividend yield—at 5.8%, it is the Tenth-highest within the S&P 500 Index—stays a key function for buyers. By comparability, the broader S&P 500 Telecommunications Providers Index fell 2% within the fourth quarter, ending a dismal yr through which it plunged 40% (see chart beneath).

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Max Advantages From HBO Streaming

Within the quarter, Seen Alpha estimates AT&T added 927,000 subscribers on a web foundation, down from 1.3 million within the fourth quarter of 2021. Previous to the launch of HBO Max in mid-2020, although, the corporate had misplaced subscribers in 5 of its eight earlier monetary quarters. For the reason that launch, web subscriber beneficial properties have exceeded 800,000 in each quarter, simply surpassing development at rival Verizon (VZ).

Even with the subscriber beneficial properties, AT&T’s income has didn’t return to pre-pandemic ranges, when its quarterly gross sales routinely reached the mid-$40 billion vary. The fourth quarter possible will mark the sixth consecutive through which income declined no less than 5% from the identical interval within the prior yr, and the corporate has elevated income in simply two quarters courting to mid-2019.

On the identical time, although, the corporate has dramatically minimize prices. Spinning off WarnerMedia helped scale back debt, and fourth-quarter working bills possible fell 25%, in accordance with Seen Alpha.

These cuts and the corporate’s comparatively strong subscriber momentum, significantly in contrast with Verizon, ought to assist its inventory carry out effectively amid turbulent financial and monetary market situations, Goldman Sachs mentioned in a current analysis report.

“We consider AT&T is healthier positioned financially and strategically (than Verizon) and that the inventory ought to maintain a premium, as it isn’t solely exhibiting meaningfully quicker wi-fi development however appears higher positioned to report rising EPS (earnings per share) and higher dividend protection,” the Goldman Sachs report mentioned.

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