AT&T on Thursday reported September-quarter earnings and revenue that topped estimates and said it added more wireless postpaid phone subscribers than expected. AT&T stock surged on the news.
Reported before the market open, 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. Revenue from continuing operations fell 4.1% to $30 billion.
Analysts had projected 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 Stock: Faster EBITDA Growth
"The EPS beat was driven by higher adjusted EBITDA ($10.7 billion) with T reporting a beat to EBITDA (earnings before interest, taxes, depreciation and amortization) across all of its key segments," said Goldman Sachs analyst Brett Feldman in a report. "AT&T now expects adjusted EPS from continuing operations for the full-year to be $2.50 or higher versus prior guidance of $2.42 to $2.46.
In addition, AT&T reported free cash flow of $3.8 billion, below consensus estimates of $4.4 billion. Capital spending came in higher than estimates in the third quarter but it's expected to fall in the December quarter.
AT&T reiterated its guidance for 2022 free cash flow in the range of $14 billion. That's down from original guidance of $20 billion, noted Craig Moffett, analyst at MoffettNathanson, in a report.
"AT&T has to show a clear path to deleveraging their balance sheet," said Moffett in a report. "Deleveraging requires faster debt retirement or faster EBITDA growth. Yes, EBITDA growth improved – and that was just one of a number of improvements in today's (Q3) earnings release – but debt reduction remains slower than one would like."
Moffett added: "All this goes a long way towards explaining why AT&T is reportedly looking for financing partners to help fund their consumer wireline fiber build. AT&T has made building fiber a foundational part of their strategy. But the capital spending required is enormous, and the payback periods are dreadfully long."
AT&T stock popped 7.7% to close at 16.74 on the stock market today.
AT&T Stock: Wireless Subscriber Adds Beat
Also, the company said it added 708,000 postpaid wireless postpaid phone customers vs. estimates for a 552,000 gain. A year earlier, it added 928,000 wireless postpaid phone subscribers. "Postpaid" subscribers usually have unlimited monthly data plans.
Wireless service revenue rose 5.4% to $15.3 billion, edging by estimates of $15.2 billion.
In addition, AT&T added 338,000 fiber broadband subscribers, topping views from AT&T stock analysts of 330,000.
AT&T stock had retreated 15% thus far this year ahead of the earnings report. Heading into the AT&T earnings report, the telecom stock owned a Relative Strength Rating of 29 out of a best-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.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
