Q3 Preview: AT&T (T) "Rethink"-ing "Possible"-ity of Losing iPhone (AAPL, VZ, VOD, MSFT)
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AT&T (NYSE: T) is trading higher ahead of the company's third quarter results, expected out before the market opens tomorrow, October 21, 2010. Shares are up 1.3% to $28.58 in afternoon trading.
The telecom giant is expected to report an EPS of $0.55 on revs of $31.23 billion. The EPS estimate is a 10% increase on revs that are just expected to increase 1.1%. The company had an EPS of $0.61 on revs of $30.81 billion, ho-hum to the analyst consensus EPS of $0.61 and revs of $30.90 billion.
The stock gained nearly 20% through the quarter, to $28.19 at the end of September. AT&T is currently trading 6.5% higher since the start of 2010.
AT&T stock is currently trading for a P/E of 11.5x FY11 EPS estimates, compared to 14.4x for Verizon Communications (NYSE: VZ), and 10.4x for Vodafone (NYSE: VOD) (which combines with VZ to become Verizon Wireless).
Data from Bloomberg shows that 20 analysts have a Buy rating on the shares, 14 have a Hold, and none recommend to Sell. The analyst price target average is $30.70, with a high of $35 and a low of $25.
Analyst Ratings Through the Quarter
At the end of July, Deutsche Bank lifted AT&T from Hold to Buy, with a $31 price target on the shares.
August saw Standpoint Research downgrade the shares from Buy to Hold. They saw AT&T as undervalued, and not moving as much other stocks upon a market recovery.
Near the end of September, Credit Suisse upgraded the shares from Neutral to Outperform, noting that the loss of the iPhone would be less of an impact that previously thought.
Summary
Deutsche Bank, who still rates AT&T at Buy with a price target of $31, sees two key highlights for the quarter being strong post-paid net adds and further improvement in wire line revs and margin trends. Specifically, Deutsche sees total wireless net adds of 2.03 million, with post-paid adds of 750,000. U-Verse adds should be 235,000 and broadband adds of 55,000. Deutsche sees an EPS of $0.53 with revs of $31.2 billion. Interestingly, Deutsche is expecting a dividend raise by the end of FY10, with a stock buyback in the works for FY11.
Though the company may be losing exclusive rights to the iPhone, the introduction of Microsoft's (Nasdaq: MSFT) new Windows Phone 7 on the network (as well as on T-Mobile), along with expected launches of several tablets will be able to fill the void. Not to say that the new iPhone 4 won't add to the top line, as Apple (Nasdaq: AAPL) reported selling a total of 14.1 million iPhone's (old and new) through their quarter.
GAAP earnings may see an $8.3 billion gain covering the depreciation of wireless assets that AT&T set up with the URS just about three weeks ago.
AT&T will also set the tone for wireless carriers through the quarter, as Verizon isn't expected to report until Friday.
AT&T is expected to release their Q310 earnings on Thursday, October 21, 2010, at approximately 8:00am EDT. Stay tuned to StreetInsider.com's EPS Central section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
The telecom giant is expected to report an EPS of $0.55 on revs of $31.23 billion. The EPS estimate is a 10% increase on revs that are just expected to increase 1.1%. The company had an EPS of $0.61 on revs of $30.81 billion, ho-hum to the analyst consensus EPS of $0.61 and revs of $30.90 billion.
The stock gained nearly 20% through the quarter, to $28.19 at the end of September. AT&T is currently trading 6.5% higher since the start of 2010.
AT&T stock is currently trading for a P/E of 11.5x FY11 EPS estimates, compared to 14.4x for Verizon Communications (NYSE: VZ), and 10.4x for Vodafone (NYSE: VOD) (which combines with VZ to become Verizon Wireless).
Data from Bloomberg shows that 20 analysts have a Buy rating on the shares, 14 have a Hold, and none recommend to Sell. The analyst price target average is $30.70, with a high of $35 and a low of $25.
Analyst Ratings Through the Quarter
At the end of July, Deutsche Bank lifted AT&T from Hold to Buy, with a $31 price target on the shares.
August saw Standpoint Research downgrade the shares from Buy to Hold. They saw AT&T as undervalued, and not moving as much other stocks upon a market recovery.
Near the end of September, Credit Suisse upgraded the shares from Neutral to Outperform, noting that the loss of the iPhone would be less of an impact that previously thought.
Summary
Deutsche Bank, who still rates AT&T at Buy with a price target of $31, sees two key highlights for the quarter being strong post-paid net adds and further improvement in wire line revs and margin trends. Specifically, Deutsche sees total wireless net adds of 2.03 million, with post-paid adds of 750,000. U-Verse adds should be 235,000 and broadband adds of 55,000. Deutsche sees an EPS of $0.53 with revs of $31.2 billion. Interestingly, Deutsche is expecting a dividend raise by the end of FY10, with a stock buyback in the works for FY11.
Though the company may be losing exclusive rights to the iPhone, the introduction of Microsoft's (Nasdaq: MSFT) new Windows Phone 7 on the network (as well as on T-Mobile), along with expected launches of several tablets will be able to fill the void. Not to say that the new iPhone 4 won't add to the top line, as Apple (Nasdaq: AAPL) reported selling a total of 14.1 million iPhone's (old and new) through their quarter.
GAAP earnings may see an $8.3 billion gain covering the depreciation of wireless assets that AT&T set up with the URS just about three weeks ago.
AT&T will also set the tone for wireless carriers through the quarter, as Verizon isn't expected to report until Friday.
AT&T is expected to release their Q310 earnings on Thursday, October 21, 2010, at approximately 8:00am EDT. Stay tuned to StreetInsider.com's EPS Central section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
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