AT&T stock reversed down Wednesday after the telecom giant reported fourth-quarter earnings and revenue that topped estimates while its 2022 revenue outlook met expectations.
“The results were weak, with EBITDA (earnings before interest, taxes, depreciation and amortization) missing in every segment,” MoffettNathanson analyst Craig Moffett said in an email. “And there is no pro-forma growth here whatsoever.”
For the quarter ending Dec. 31, AT&T (T) earned 78 cents per share on an adjusted basis, up nearly 4% from a year earlier. Revenue fell 10% to $ 41 billion including the divestiture of satellite TV firm DirecTV, but topped views.
A year earlier, AT&T earnings were 75 cents a share on revenue of $ 45.7 billion. Analysts estimated earnings of 76 cents a share on revenue of $ 40.3 billion.
For fiscal 2022, AT&T said it expects per-share earnings in a range of $ 3.10 to $ 3.15. The telecom firm forecast revenue growth in the low single digits. Analysts predicted 2022 earnings of $ 3.16 a share on revenue of $ 156.3 billion, up from $ 153.2 billion.
AT&T stock initially rose before the market opened on the earnings release. But T stock fell 8.4% to close at 24.25 on the stock market today.
Heading into the earnings report, shares had gained 7.6% in 2022 amid a market correction.
AT&T Stock: Discovery Deal To Close
AT&T in early January pre-announced wireless postpaid phone subscriber results for the period. The company added 880,000 postpaid phone subscribers, topping estimates of 804,000
Also, AT&T has agreed to merge its WarnerMedia business with Discovery (DISCA). The deal could close in the second quarter of 2022. How AT&T handles the divesture could impact its dividend.
AT&T plans to distribute its 71% stake in the combined company, to be called Warner Brothers Discovery, to shareholders. But the manner in which it will be done has not yet been decided.
“Heading into earnings, AT&T investors were favoring a split (vs. a spin-off), or an exchange of T stock for DISCA where investors have the option to swap T for new DISCA stock,” said Well Fargo analyst Eric Luebchow in a report.
He added: “It’s clearly a more complicated transaction in which T would likely have to offer a ‘kicker’ for investors to exchange shares, but effectively would enable them to retire 1.7 billion total shares (akin to a share buyback). Management on the call seemed to be leaning slightly more toward a spin-off, which is a cleaner, simpler transaction (particularly for AT & T’s retail investor base) for a split of this size. “
Verizon Stock Downgraded On Wireless Competition
Meanwhile, JPMorgan analyst Philip Cusick downgraded on Wednesday Verizon Communications (VZ) to neutral.
“We are increasingly concerned about the subscriber growth outlook for postpaid phones in 2022 for Verizon and the industry overall, even beyond Q1 which is seasonally soft and where we expect Verizon to post subscriber losses,” he said in a report. “Competition remains high in wireless and likely gets more difficult as new supply comes on from C-band, T-Mobile’s 2.5 GHz spectrum, Dish’s eventual launch, and cable’s small cell efforts.”
Verizon stock fell 3.5% to 51.02.
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