Q1 Preview: AT&T (T) iPhone Loss Already Priced In, Wireline Still Bleeding

AT&T (NYSE: T) closed flat Tuesday ahead of the company's first-quarter earnings release, expected out before the market opens Wednesday.

AT&T is expected to report EPS of $0.57 on sales of $31.27 billion. Last quarter, the Dallas, TX-based company posted EPS of $0.54 on revenue of $31.4 billion. Looking back at the first quarter of last year, AT&T issued EPS of $0.59 on sales of $30.6 billion.

Shares gained 4.7% through the quarter and are up just 0.2% since.

AT&T shares currently trade at a forward PE of 11.9x FY12 EPS estimates, compared to 14.1x for Verizon Communications (NYSE: VZ) and 12.6x for Apple Inc. (Nasdaq: AAPL).

Data from Bloomberg has 19 analysts with a Buy on AT&T, 14 with a hold, and none suggesting to Sell. The analyst price target average is $32, with a high of $36 and low of $29. Shares have traded in a range of $31.00 - $23.78 over the last 52-weeks.

Analyst Summary

• Goldman is Neutral on AT&T into the report. Goldman expects EPS of $0.57. "In Wireless, we expect postpaid net adds to turn negative, largely owing to AT&T’s loss of iPhone exclusivity during the quarter. We estimate postpaid net losses of (50K), in-line with consensus of (42K)... On the ARPU front, we expect AT&T’s industry-high postpaid ARPU to continue growing at 2% this quarter, though lower iPhone loading and growing iPad data plans are likely to dilute this rate going forward. Despite continued postpaid ARPU growth and lower iPhone volumes this quarter, we expect wireless margins to decline roughly 400 bp yoy to 40.4% (below consensus of 41.9%)."
  
  
• Wells Fargo sees EPS of $0.56. Looking for positive growth in wireless for AT&T, saying, "While this growth will certainly reflect the competitive challenges of the VZ iPhone, we do not believe the “dooms day” scenario which many have forecast will be seen. Based on our discussions with several store reps, AT&T has seen much traction with its 4G handsets as well as the other smartphones in its line up." Wireline should report more of the same from last quarter, according to Wells Fargo.
  
  
• Collins Stewart sees Q1 adjusted EPS of $0.57 on revs of $31.14 billion. "With AT&T post paid net add estimates that range +/- one million for full-year 2011 (-500k to +250k for 1Q11) and with still challenging wireline business, we find the recent run in the stock that largely attributable to the announcement of the T-Mobile deal and that the stock is fairly valued."
  
  Collins also sees a little headwind in Wireline and minimal impact from wireless industry pricing changes.
  
  
• Citadel sees EPS of $0.58. "We believe AT&T will report overall solid, but not stellar, results. Consensus appears to expect postpaid subscriber losses in 1Q, which we think sets a low bar. We estimate +70k net adds; however, we think AT&T may have benefited from deterioration at T-Mobile. If true, a better-than-expected net add result should not be interpreted positively, since AT&T is planning to buy T-Mobile. We continue to believe the proposed acquisition faces a tough and uncertain regulatory review, and expect AT&T's stock to be range-bound until investors have more clarity on the likely outcome of the review process."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of the release.

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