AT&T (T) on Thursday reported earnings and revenue for the September quarter that topped estimates and said it added more wireless postpaid phone subscribers than expected. AT&T stock rose on the news.
Reported before the market opened, AT&T earnings excluded WarnerMedia, spun off in early April, and DirecTV. The telecom giant said third-quarter adjusted earnings from continuing operations were 68 cents, up 3% from a year earlier. Income from continuing operations fell 4.1% to $30 billion.
Analysts had forecast AT&T earnings of 61 cents a share on revenue of $29.8 billion, according to FactSet. A year earlier, AT&T earned 66 cents a share on revenue of $39.9 billion, but that included sales from discontinued operations.
T-share: Faster EBITDA growth
“The EPS pace was driven by higher adjusted EBITDA ($10.7 billion) with T reporting a hit to EBITDA (earnings before interest, taxes, depreciation and amortization) across all key segments,” Goldman Sachs analyst Brett Feldman said in a report. “AT&T now expects full-year adjusted EPS from continuing operations to be $2.50 or higher compared to prior guidance of $2.42 to $2.46.
Additionally, AT&T reported free cash flow of $3.8 billion, below consensus estimates of $4.4 billion. Investments came in higher than estimates in the third quarter, but they are expected to fall in the December quarter.
AT&T reiterated its guidance for 2022 free cash flow in the $14 billion range. That’s down from the original guidance of $20 billion, Craig Moffett, an analyst at MoffettNathanson, noted in a report.
“AT&T needs to show a clear path to reducing its balance sheet,” Moffett said in a report. “Debt reduction requires faster deleveraging or faster EBITDA growth. Yes, EBITDA growth improved – and that was just one of a number of improvements in today’s (Q3) earnings report – but debt reduction is still slower than desired.”
Moffett added, “All of this goes a long way to explaining why AT&T is reportedly looking for financing partners to help finance the construction of cable-based fiber for consumers. AT&T has made building fiber a fundamental part of their strategy. But the capital expenditures required are huge, and the payback periods are terribly long.”
AT&T stock fell 7.7% to 16.74 in afternoon trading on the stock market today.
AT&T Stock: Wireless Subscriber Adds Beat
The company also said it added 708,000 postpaid wireless postpaid phone customers vs. estimates for a gain of 552,000. A year earlier, it added 928,000 wireless postpaid phone subscribers. “Postpaid” subscribers usually have unlimited monthly data plans.
Wireless revenue rose 5.4% to $15.3 billion, beating estimates of $15.2 billion.
In addition, AT&T added 338,000 fiber broadband subscribers, topping AT&T stock analyst views of 330,000.
AT&T stock had fallen 15% so far this year ahead of the earnings report. Heading into AT&T’s earnings report, the telecom stock owned a relative strength rating of 29 out of a possible 99, according to IBD Stock Checkup.
WarnerMedia broke away and merged with Discovery in early April. The new media company is called Warner Bros. Discovery (WBD).
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on wireless 5G, artificial intelligence, cyber security and the cloud.
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