AT&T (T) Q1 Wireless Business 'Impressive', Says Wells Fargo

April 23, 2014 9:01 AM EDT
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Wells Fargo maintained an Outperform rating on AT&T (NYSE: T) with a price target of $42-$44. Analyst Jennifer M. Fritzsche commented on Q1, calling wireless subs impressive.

'T reported solid Q1'14 results characterized by better-than-expected wireless results - most notably in net adds and churn. As to be expected, the company's EIP plan, Next and economics around it were a major focus of the quarterly print. T offered new guidance which includes the impact from LEAP acquisition. We believe T's 2014 guidance is quite achievable based on strong Q1 performance metrics. We are adjusting our estimates. Specifically, FY2014E revenue and EPS are $133.2B and $2.73 vs. $131.5B and $2.67 prior. Our FY2015E are $134.8B and $2.88 vs. $134.0B and $2.79 prior," said Fritzsche.

"WIRELESS – BIG TIME SOLID - Q1 wireless revenue, EBITDA and EBITDA margin were $17.9B, $7.0B and 45.4% vs. our estimates of $17.4B, $6.9B and 44.2%, respectively. The company added 625K postpay net adds, well above our 180K estimate and Street consensus of 212K. Over 1.1MM new postpay smartphones were added (upgrades and new subs), and smartphones accounted for 92% of postpay phone sales. Postpay churn was 1.07% vs. our 1.04% estimate. Over 40% (~2.9MM) of all smartphone gross adds and upgrades were on Next plans, up from 15% in Q4’13, and excluding the 1.1MM "accelerated upgrades,"the Next take rate was ~35% in Q1," added the analyst.

For an analyst ratings summary and ratings history on AT&T click here. For more ratings news on AT&T click here.

Shares of AT&T closed at $36.29 yesterday.

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