AT&T Inc. (T - Analyst Report) is slated to report its fourth-quarter 2013 results on Apr 22, after the market closes. In the last quarter, the company delivered a 6.00% earnings surprise. Let’s see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that AT&T is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +4.35% for AT&T. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: AT&T currently has a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks of #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings.
The combination of AT&T’s Zacks Rank #2 and +4.35% ESP makes us confident of an earnings beat this release.
What is Driving the Better-Than-Expected Earnings?
We expect the company to experience strong momentum in both wireline and wireless businesses. Unprecedented demand for smartphones and tablets is fueling wireless business growth. To support this demand, AT&T is deploying its LTE network well ahead of its schedule and offers the best Internet speeds in the U.S. The company’s Wireline segment is leveraging from continued growth in its U-verse and strategic services.
Further, AT&T remains a leader in Wi-Fi (wireless broadband) connectivity, which will be accretive to its growth. We also remain encouraged by AT&T‘s acquisition of Leap Wireless, which will boost its prepaid division. However, spectrum crunch and continued loss of access lines pose major impediments to the company’s growth story.
Other Stocks to Consider
Here are some other companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Level 3 Communication Inc. (LVLT - Snapshot Report) with earnings ESP of +17.86% and Zacks Rank #1.
BCE Inc. (BCE - Analyst Report) with earnings ESP of +1.49% and Zacks Rank #2.
Verizon Communications Inc. (VZ - Analyst Report) with earnings ESP of +3.53% and Zacks Rank #3.
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