AT&T (T) Needs To Shows Ex-iPhone Business Was Solid in Q3

AT&T, Inc. (NYSE: T) is trading relatively flat this afternoon, up 0.04% to $26.00. AT&T is scheduled to release their third quarter earnings results before the market opens up tomorrow, October 22, 2009.

AT&T is up about 2% through the quarter, compared to 11.4% for the Communications Services sector.

Analysts on Wall Street see AT&T producing $0.50 EPS with revenues of $30.88 billion. For Q209, AT&T posted an EPS of $0.54 on revenues of $30.73 billion. The third quarter in 2008 saw AT&T report an EPS of $0.67 and revenue of $31.3 billion, both came in below analyst estimates.

Data from Bloomberg shows that 21 analysts have Buy ratings on AT&T, 11 have Holds, and 1 has a Sell on the stock Intuitive Surgical analysts have an average price target of $29.84.

FBR Capital reiterated their Outperform rating, while lowering their Q309 Revenue estimate to $30.6 billion from $31 billion, and also lowered their EPS estimates from $0.54 to $0.50. FBR maintains their price target of $34, stating: "We expect that the company's major focus will continue to be (1) investing heavily to generate positive momentum in the wireless sector and (2) introducing further head-count reduction initiatives in a drive to establish functional efficiency and maintain tight opex cost controls in this tough macroeconomic environment." They continue, "Investors continue to discount T shares despite the fact that the company is in its best strategic position ever, in our view, and is well positioned to accelerate the rationalization of its cost structure from 2010 now that the bulk of the union renegotiation process is complete."

Goldman Sachs says this about AT&T: "We are trimming our broadband and video net add expectations for Q309 mainly owing to more aggressive cable competition (driven mainly by Comcast). Our Q309 broadband/video net adds are now 100K/250K from 175K/300K previously. On the wireless front, we continue to expect a strong subscriber growth quarter driven by iPhone momentum. Our Q309 postpaid net addition estimate of 1.4 million is at the high end of consensus, as we believe AT&T continued to gain share from national peers. Wireless margins, while still under pressure because of high iPhone loading, should improve Y/Y, as AT&T begins to lap the first quarter of the 3G iPhone last year. We forecast 37.6% margins in 3Q2009, up from 33.5% in 3Q08. Our other estimates remain unchanged."

Pali recently released an AT&T analysis partly based on the news that Apple (NASDAQ: AAPL) had strong iPhone sales. Pali comments on the sales: "While the strong sales of the iPhone are positive for AT&T in the near term, they increase the company's reliance on a product for which we do not believe it will be able to maintain exclusivity. We believe more than one third of AT&T's post paid customer base is tied to an iPhone user and that mix is likely to rise significantly over the next few quarters." The firm didn't adjust their Q3 EPS of $0.50 or FY10 EPS of $2.02."

AT&T will issue its Q309 results via press release at approximately 7:30 AM (EDT) on October 22, 2009. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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