AT&T early Thursday reported first-quarter earnings that topped estimates while revenue and free cash flow missed Wall Street targets. T stock plunged as wireless subscriber growth slowed down as expected.
Reported before the market open, AT&T earnings excluded WarnerMedia, spun off in early April 2022. The telecom giant said March quarter adjusted earnings from continuing operations were 60 cents, down nearly 5% from a year earlier. Revenue from continuing operations rose 1.4% to $30.1 billion.
Analysts had projected AT&T earnings of 58 cents a share on revenue of $30.2 billion, according to FactSet. A year earlier, AT&T earned 63 cents a share on revenue of $29.7 billion from continuing operations.
AT&T said first-quarter free cash flow came in at $1 billion, down 64% from a year earlier, missing estimates of $3.2 billion. Free cash flow growth supports AT&T's dividend.
"The eye opener was a much weaker-than-expected free cash flow result," said Craig Moffett, analyst at SVB MoffettNathanson. "For a company that is over-levered and yet pays such a rich dividend, free cash flow matters most."
At Goldman Sachs, analyst Brett Feldman said in a report: "While we had anticipated lower FCF to start the year, investors may question whether AT&T can achieve its full-year FCF guidance of $16 billion-plus as this will likely require significant improvements in working capital impacts for the remainder of 2023. The release states that AT&T remains confident in its full-year guidance."
T Stock: Wireless Subscriber Growth Slows
On the stock market today, T stock tumbled 10.4% to close at 17.65, erasing its 2023 gains. Shares hold an entry point of 21.63.
During the first quarter, wireless revenue rose 2.5% to $20.6 billion. Also, the company said it added 424,000 postpaid wireless postpaid phone customers during the quarter vs. estimates for a 396,000 gain.
AT&T added 691,000 postpaid phone subscribers in the year-earlier period. Subscriber growth is expected to slow for T-Mobile US and Verizon Communications as well.
Verizon reports on April 25. T-Mobile follows on April 27.
Heading into the AT&T earnings report, shares owned a Relative Strength Rating of 78 out of a best-possible 99, according to IBD Stock Checkup.
WarnerMedia merged with Discovery to form Warner Bros. Discovery.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
