Q4 Preview: AT&T (T) May See Similar Margin Consolidation on iPhone Sales

Shares of AT&T (NYSE: T) closed higher Wednesday ahead of the company's fourth-quarter earnings report, expected out Thursday before the market opens.

Analysts are expecting earnings of 43 cents per share and revs of $31.95 billion in the quarter. If AT&T can hit the Street's estimates, quarterly profit would be a 22 percent decline from the same period last year.

Shares moved 7.6 percent higher to $29.80 in the quarter and are up 1.2 percent since. AT&T has traded within a tight range of $27.20 to $31.94 over the last 52-week time frame.

Data from Bloomberg has 14 analysts with a Buy on AT&T, 21 at Hold, and two with a Sell rating. The Street's price target average is $31.50, with a low of $26.50 and high of $35.

Analyst Comments

• Deutsche Bank is modeling for EPS of 45 cents and revs of $32.082 billion. Net post paid adds of 650,000 and prepaid adds of 360,000. Post paid churn should be 1.18 percent, and total subs of 103.50 million.
  
  Deutsche sees record smartphone sales of 9 million units and over 6 million Apple (Nasdaq: AAPL) iPhone units. The firm commented, "We believe growing smartphone penetration (from 53 percent in 3Q) drove accelerated YoY growth in post paid ARPU (1.8 percent in 4Q vs. 1.4 percent in 3Q) and service revenue (4.5 percent vs. 4.3 percent). However, demand from existing T subs for the new iPhone likely resulted in significant upgrades with limited ARPU benefit."
  
  On wireline: "We expect Business revenue (est $9.3B) to decline 2.2 percent vs. 2.7 percent in 3Q11. Within Business, we see improving trends in Enterprise, Wholesale and SMB. In Consumer, our $5.3B revenue est represents flat YoY growth, consistent with the past several q’s."
  
  
• Wells Fargo sees EPS of 41 cents and revs of $31.9 billion. Total wireless net adds should be 2.2 million, with 530,000 of postpaid. Wells Fargo sees revs of $16.1 billion for the segment and $4.6 billion of EBITDA.
  
  The firm expects $14.9 billion in wireline revenue, "namely driven by strong y/y growth in the company's UVerse offering. We are modeling $4.7B EBITDA and 31.7% EBITDA margin, a 30bps sequential improvement."
  
  
• Kaufman sees EPS of 42 cents and revs of $32.3 billion. Kaufman is looking for wireless postpaid adds of 450,000 and churn of 1.14 percent. Further, the firm comments, "Postpaid ARPU is expected to increase 2 percent Y/Y to $64.15 and consolidated ARPU is expected to decline 3 percent to $47.41. We project wireless service revenue growth of 5 percent Y/Y to $14.5 billion, total wireless revenue growth of 8.6 percent to $16.5 billion, and a 8.7% Y/Y decline in wireless EBITDA to $4.7 billion."
  
  For wireline, Kaufman sees voice revs falling 8 percent to $6.1 billion and total revs down 1 percent to $14.9 billion.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out AT&T's past performance at Streetinsider's AT&T's Income Statement.

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