AT&T early Wednesday reported fourth-quarter earnings that topped estimates while revenue came in just below Wall Street targets. T stock popped, moving into a buy zone, as full-year free cash flow edged by the company's own outlook.
Reported before the market open, AT&T earnings excluded WarnerMedia, spun off in early April 2022. The telecom giant said fourth-quarter adjusted earnings from continuing operations were 61 cents, up 9% from a year earlier. Revenue from continuing operations rose 0.8% to $31.3 billion.
Analysts had projected AT&T earnings of 57 cents a share on revenue of $31.4 billion, according to FactSet. A year earlier, AT&T earned 56 cents a share on revenue of $40.96 billion, but that included sales from discontinued operations.
T Stock: 2023 Free Cash Flow Outlook
In addition, AT&T reported full-year free cash flow of $14.1 billion, topping analyst estimates of $13.78 billion. AT&T had forecast $14 billion in free cash flow. In the fourth quarter, AT&T churned out $6.1 billion in free cash flow, topping estimates of $5.37 billion.
For fiscal 2023, AT&T predicted free cash flow of $16 billion vs. Wall Street estimates of $16.2 billion. Free cash flow growth supports AT&T's dividend.
"We view AT&T's reasonably conservative 2023 FCF guide of $16 billion, inclusive of $24 billion in capital spending, as the key takeaway for the print," Wells Fargo analyst Eric Luebchow said in a note to clients.
He added: "With an outlook of '$16 billion or better,' AT&T put out a guide we think is appropriately conservative — with upside potential — which includes EBITDA growth. Capital spending is expected to moderate in 2024 and beyond. Importantly, this implies the dividend payout ratio is just over 50%, providing plenty of financial flexibility."
The telecom said it expects 2023 adjusted earnings of $2.40 a share at the midpoint of its outlook. That includes a negative 25-cent impact from higher interest rates and taxes. Also, T stock analysts had projected 2023 earnings of $2.56 a share on revenue of $122.8 billion.
AT&T did not provide a 2023 revenue forecast.
On the stock market today, T stock popped 6.6% to close at 20.42. Shares hold an entry point of 19.62.
Postpaid Phone Subscribers Top Views
Also, the company said it added 656,000 postpaid wireless postpaid phone customers during the quarter vs. estimates for a 645,000 gain.
But AT&T added 280,000 fiber broadband subscribers, missing analysts views for 330,000.
T stock had gained 4% thus far this year ahead of the earnings report. Heading into the AT&T earnings report, shares owned a Relative Strength Rating of 62 out of a best-possible 99, according to IBD Stock Checkup.
WarnerMedia broke away and merged with Discovery in early April 2022. The new media company is called Warner Bros. Discovery. WBD stock has gained 40% in 2022.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
