AT&T's Stephenson Has Much to Discuss on Earnings Call

Posted April 26, 2017

Overall, the Dallas company reported first-quarter earnings of $3.47 billion, or 56 cents per share, down from $3.8 billion, or 61 cents, the year before.

DirecTV had 21.012 million domestic subs as of the end of March, flat sequentially, compared with 328,000 net adds in the year-earlier period. Wireless postpaid churn was 1.12%, including pressure from tablets.

Excluding special items, adjusted earnings were $0.74 per share. "The strategic moves we've made over the last few months to expand our wireless capacity and fortify our 5G leadership will be felt for years to come", said Randall Stephenson, AT&T Chairman and CEO. In the same period from a year ago, AT&T reported $0.72 in EPS and $40.53 in revenue.

AT&T added 2.7 million customers, on a "gross" basis, of which 2.1 million in the USA, driven by the "pre-paid" variety.

The deal for Time Warner - owner of CNN, TNT, HBO and the Warner Bros. film and TV studio, among other things - is seen helping AT&T potentially find new areas of growth as its core wireless business has become saturated and its share of the mobile market leaves little room for acquisitions.

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AT&T is fighting to both keep and add customers and increase revenue amid a price war with smaller rivals T-Mobile US Inc. and Sprint Corp.

Operating expenses fell to $32.5 billion from $33.4 billion; operating income was $6.9 billion versus $7.1 billion; and operating income margin was 17.4 percent versus 17.6 percent. Currently, T is a Zacks Rank #3 (Hold), and is up 1% to $40.34 per share in trading shortly after its earnings report was released.

In contrast, TMUS recorded 914,000 net postpaid phone subscribers in its recently reported quarter.

AT&T also said it would no longer give a full-year revenue forecast due to the unpredictability of wireless handset sales.

Looking ahead, AT&T is updating its 2017 guidance. The company expects adjusted EPS growth in the mid-single digit range, adjusted operating margin expansion, capital expenditures in the $22 billion range, and free cash flow in the $18 billion range.