Elliott Management's investment in AT&T and the list of proposals to the company's board of directors have strengthened the shares since September. This week, AT&T will have many chances to respond to the activist hedge fund's proposal, which includes buying back more shares and considering spinning underperforming businesses.
The telecom and media giant is scheduled to report third-quarter revenue on Monday before the market opens. The company will host an investor day, focused on WarnerMedia's planned streaming service, on Tuesday in Burbank, California.
Investors digging through the quarterly report will focus on the company's progress in paying down debt and whether increased share repurchases could become part of the picture soon. They will also look at subscriber trends at AT & T's wireless business and its subsidiary DirecTV satellite TV.
stock (ticker: T) had returned 37.4% this year, including dividends, through Friday's close. It is ahead of its peers and
which had returned 22%.
T-Mobile USA (TMUS)
(VZ) had returned 28.2% and 11.8% respectively.
Here is a snapshot of Wall Street expectations and some recent history.
• AT&T has diversified beyond the telephone industry in recent years. The company completed a $ 67 billion DirecTV acquisition in 2015, and the $ 109 billion acquisition of Time Warner closed earlier this year following legal challenges. Although the stock fell back in 2019, it has lagged behind the market and its peers over the past few years.
• Elliott Management revealed a $ 3.2 billion stake in AT&T last month and published a letter to the board with detailed recommendations on how to improve operations, strategy and capital allocation. It also criticized AT & T's acquisition strategy, calling it a waste and a distraction from the company's core business. AT&T should consider disposing of other segments, Elliott said. Investors cheered on the news and sent AT&T shares higher.
• Barron's noted that many of Elliott's recommendations were already in the works at AT&T, but that investors would benefit from greater transparency and formalization of plans at some point as targets for cost reduction or return on capital. The AT&T management has since talked more about the opportunity to increase repurchases when they reach their debt reduction target for this year. A resolution may even be unveiled on Monday.
• AT & T & # 39; s WarnerMedia division is hosting an investor day on Tuesday, the day after the company's earnings report. The main topic will be WarnerMedia's planned direct-to-customer streaming service, HBO Max. It will feature 10,000 hours of content from HBO, Warner Bros., DC Entertainment, CNN, TNT, Cartoon Network, Adult Swim, and other WarnerMedia features. The service will be available next spring, probably at a premium price to HBO Now's current $ 14.99 a month.
• AT&T is expected to report 93 cents in adjusted earnings per share, up from 90 cents in the same quarter in 2018. Revenues are projected to reach $ 45.1 billion, compared to $ 45.7 billion last year. Analysts forecast $ 15.3 billion in adjusted earnings before interest, taxes, depreciation and amortization, down from $ 15.9 billion last year.
• Wall Street expects AT&T to show net 70,900 postpaid wireless phone customers in the third quarter, while losing a net 172,100 net subscriptions to total payment. This compares to a net gain of 69,000 postpaid phones and a total postpaid net loss of 232,000 in the same period last year. Analysts also expect 235,400 net new prepaid accounts, down from 570,000 in Q3 2018. AT&T has said that because promotional periods are ending for many DirecTV customers, cancellations would be particularly high this year. The consensus forecast is for a loss of more than one million satellite video accounts and 47,300 subscribers to DirecTV Now.
• AT & T's second-quarter earnings of $ 0.89 per share, reported July 24, were in line with analysts' expectations, while sales were slightly ahead of $ 45 billion. Subscriber declines on DirecTV were worse than expected, while wireless subscriber additions were better. The stock rose 3.6% that day.
• Wall Street analysts are divided on the stock: 44% have a Buy or similar rating, while 52% recommend a Hold. One analyst estimates AT&T on Sell. The average target price is $ 36.30, close to the recent $ 36.82 level. The AT&T share also pays a 5.5% annual dividend.
• AT&T will release the results before 7am on Monday, followed by a conference call with analysts at 08:30
Write to Nicholas Jasinski at firstname.lastname@example.org