Q3 Preview: AT&T (T) Wades Through Difficult Economy, T-Mobile Deal Remains an Overhang
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Shares of AT&T (NYSE: T) are trading down slightly on the day as the company is scheduled to report its third quarter results tomorrow ahead of the opening bell. Management will host a conference call at 10:00 AM ET. The dial-in number is 866-232-4457 or 612-332-1213 for international callers.
AT&T's earnings will kick off the third quarter earnings season for telecom services.
The Street is forecasting an 11 percent increase in earnings with a 10.5 percent rise in total revenues. The consensus for AT&T's third quarter is currently $31.62 billion in revenue with $0.61 in earnings per share. The Street is also expecting AT&T to report 300 thousand postpaid net adds for the quarter.
Ahead of earnings some analysts are thinking happy thoughts while others don't anticipate to much good news coming.
Ben Abramovitz, an analyst at Kaufman Bros., has a Hold rating and $31 price target on shares of T. He forecast earnings of $0.59 per share on $31.5 billion in revenue for the quarter. Mr. Abramovitz also believes that AT&T will report 250 thousand postpaid net adds for the quarter and estimates a postpaid churn rate of 1.16 percent. The firm estimates a 4 percent growth year over year in wireless service revenues as wireline and voice revenues are expected to decline by 2 percent and 11 percent. EBITDA is predicted to increase by 17 percent for the third quarter.
Mr. Abramovitz comments, "We are anticipating revenue growth per user to continue within wireless while wireline revenue should decline at a slower rate. We believe shares provide limited upside to investors offset with a defensible, recession resistant business and a 6% dividend yield."
Wells Fargo estimates AT&T will release its quarterly results with $31.6 billion in revenue and earnings of $0.60 per share. The firm highlights its estimates are based on 330 thousand postpaid net adds and an 80 basis point increase in wireless margins to 42 percent. Analysts at Wells Fargo also anticipate a 2.7 percent decrease in wireline revenues, down from its previous estimate of 2.2 percent. The company’s U-Verse service is expected to see an additional 200 thousand contracts.
Wells Fargo reports, "One area of focus on the call is likely to be capital expenditure given recent negative pre announcements by both wireless and wireline equipment suppliers and some recent chatter that there may have been some pause in capx trends related to AT&T's negotiations with its vendors." The firm currently has an Outperform rating on company.
Analysts at Collins Stewart indicate the lawsuit filed by the Depart of Justice on the T-Mobile USA acquisition will continue to linger on the price of shares. For the third quarter, the firm expects 301 thousand postpaid net adds. The firm's estimates are inline with the consensus as it forecasts $31.7 billion in revenue and $0.61 in earnings per share. EBITDA margin is expected to be 34.7 percent while operating margin is estimated to be 20.2 percent. Collins Stewart sees free cash flows for the quarter of $1.77 billion following dividends.
"With 9 percent unemployment rate, weak new business formation and continued competition from the cable operators, we believe a turnaround in the wireline business will likely be a slow process. However, with the ongoing cost reduction initiatives at Verizon (NYSE: VZ), we believe its wireline margins will continue to improve, further shrinking the gap between that of AT&T," reports an analyst at Collins. The firm currently has a Neutral rating on shares of T.
AT&T's earnings will kick off the third quarter earnings season for telecom services.
The Street is forecasting an 11 percent increase in earnings with a 10.5 percent rise in total revenues. The consensus for AT&T's third quarter is currently $31.62 billion in revenue with $0.61 in earnings per share. The Street is also expecting AT&T to report 300 thousand postpaid net adds for the quarter.
Ahead of earnings some analysts are thinking happy thoughts while others don't anticipate to much good news coming.
Ben Abramovitz, an analyst at Kaufman Bros., has a Hold rating and $31 price target on shares of T. He forecast earnings of $0.59 per share on $31.5 billion in revenue for the quarter. Mr. Abramovitz also believes that AT&T will report 250 thousand postpaid net adds for the quarter and estimates a postpaid churn rate of 1.16 percent. The firm estimates a 4 percent growth year over year in wireless service revenues as wireline and voice revenues are expected to decline by 2 percent and 11 percent. EBITDA is predicted to increase by 17 percent for the third quarter.
Mr. Abramovitz comments, "We are anticipating revenue growth per user to continue within wireless while wireline revenue should decline at a slower rate. We believe shares provide limited upside to investors offset with a defensible, recession resistant business and a 6% dividend yield."
Wells Fargo estimates AT&T will release its quarterly results with $31.6 billion in revenue and earnings of $0.60 per share. The firm highlights its estimates are based on 330 thousand postpaid net adds and an 80 basis point increase in wireless margins to 42 percent. Analysts at Wells Fargo also anticipate a 2.7 percent decrease in wireline revenues, down from its previous estimate of 2.2 percent. The company’s U-Verse service is expected to see an additional 200 thousand contracts.
Wells Fargo reports, "One area of focus on the call is likely to be capital expenditure given recent negative pre announcements by both wireless and wireline equipment suppliers and some recent chatter that there may have been some pause in capx trends related to AT&T's negotiations with its vendors." The firm currently has an Outperform rating on company.
Analysts at Collins Stewart indicate the lawsuit filed by the Depart of Justice on the T-Mobile USA acquisition will continue to linger on the price of shares. For the third quarter, the firm expects 301 thousand postpaid net adds. The firm's estimates are inline with the consensus as it forecasts $31.7 billion in revenue and $0.61 in earnings per share. EBITDA margin is expected to be 34.7 percent while operating margin is estimated to be 20.2 percent. Collins Stewart sees free cash flows for the quarter of $1.77 billion following dividends.
"With 9 percent unemployment rate, weak new business formation and continued competition from the cable operators, we believe a turnaround in the wireline business will likely be a slow process. However, with the ongoing cost reduction initiatives at Verizon (NYSE: VZ), we believe its wireline margins will continue to improve, further shrinking the gap between that of AT&T," reports an analyst at Collins. The firm currently has a Neutral rating on shares of T.
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