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AT&T (T) Down 5.7% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for AT&T Inc. (T - Free Report) . Shares have lost about 5.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AT&T Q1 Earnings In Line with Estimates, Revenues Miss
On a GAAP basis, AT&T reported net income of $3,469 million or $0.56 per share compared with $3,803 million or $0.61, in the year-ago quarter. Quarterly adjusted (excluding non-recurring items) earnings per share were $0.74, in line with the Zacks Consensus Estimate.
Quarterly total revenue dropped 2.9% year over year to $39,365 million but fell below the Zacks Consensus Estimate of $40,661 million. Of this, Service revenues were $36,456 million, down 1.7% and Equipment revenues were $2,909 million, down 15.3%. Total operating expenses in the reported quarter were $32,501 million, down 2.7% year over year. Operating income was $6,864 million compared with $7,131 million in the year-ago quarter.
Cash Flow & Liquidity
In the first quarter of 2017, AT&T generated $9,218 million of cash from operations compared with $7,900 million in the year-ago quarter. Free cash flow in the reported quarter was $3,203 million compared with $3,231 million a year ago.
At the end of the first quarter of 2017, AT&T had $14,884 million of cash and cash equivalents and $133,249 million of total debt outstanding compared with $5,788 million and $123,513 million, respectively, at the end of 2016. The debt-to-capitalization ratio was 0.49 at the end of the reported quarter compared with 0.48 at the end of 2016.
Business Solutions Segment
Total revenue at the segment was $16,848 million, down 4.3% year over year. Of this, Wireless service revenues totaled $7,929 million, inching up 0.9% year over year. Fixed strategic services revenues reached $2,974 million, up 8.1%. Legacy voice and data services contributed $3,630 million, down 17%. Other service & equipment generated $817 million, down 4.9% while Wireless Equipment revenues totaled $1,498 million, down 15.4%. Operating income was $4,360 million, up 1.4%. However, operating margin was 25.9% compared with 24.4% in the prior-year quarter.
As of Mar 31, 2017, the Business Solutions wireless subscriber base was 82.354 million, up 8.7% year over year. Within this, Postpaid wireless subscriber count was 50.839 million and Connected Devices were 31.439 million. In the reported quarter, this segment lost a net 125,000 postpaid wireless customers but gained 2.553 million connected devices. Business wireless postpaid churn rate was 1.07% compared with 1.02% in the year-ago quarter. Total wireline broadband connections were 1.426 million, down 4.4% year over year. IP-broadband was pegged at 980,000. Net broadband addition was 4,000.
Entertainment Group Segment
Total revenue at the segment grossed $12,623 million, inching down 0.3% year over year (post the DIRECTV acquisition). Of the total, video entertainment revenues were $9,020 million, up 1.3%. High-Speed Internet revenues were $1,941 million, up 7.7%. Legacy voice and data services contributed $1,056 million, down 19.6%. Equipment and Other service generated $606 million, down 5%. Operating income was $1,603 million in the reported quarter compared with $1,592 million in the prior-year quarter. Operating margin was 12.7%, compared with 12.6% a year ago.
As of Mar 31, 2017, total video connections at this segment were 25.032 million, down 1.2%. Of the total, Satellite connections tallied 21.012 million (up 4.5%) and U-verse connections were 4.02 million (down 23.2%). In the reported quarter, AT&T lost 233,000 U-verse customers while satellite TV customer count remains same. Total broadband connections at this segment were 14.294 million, flat year over year. Of the total, IP-broadband was pegged at 13.130 million, while DSL-broadband was 1.164 million. Total wireline voice connections were 11.003 million, down 9.2%.
Consumer Mobility Segment
Total revenue at the segment was $7,740 million, down 7.1% year over year. Of the total, Service revenues were $6,609 million, down 4.8%. Equipment revenues generated $1,131 million, down 18.3%. Operating income was $2,339 million, down 6.2%. Operating margin was 30.2% compared with 29.9% in the prior-year quarter.
As of Mar 31, 2017, the Consumer Mobility wireless subscriber base was 51.864 million, down 5.1%. Of this, postpaid wireless subscribers totaled 26.51 million and prepaid wireless customers were 13.844 million. Reseller wireless subscriber base totalled 10.549 million and Connected Devices count was 961,000. In the reported quarter, this segment gained a net of 282,000 prepaid customers and 19,000 connected devices but lost a net of 66,000 postpaid wireless customers and 588,000 resellers. Consumer Mobility postpaid churn rate was 1.22% compared with 1.24% in the year-ago quarter. Total churn rate for the segment was 2.42%, up from 2.11% in the year-ago quarter.
International Segment
Total revenue at the segment was $1,929 million, up 15.7% year over year. Within the total, Video entertainment revenues were $1,341 million, up 18.7%. Wireless service revenues were $475 million, up 4.4%. Wireless Equipment revenues were $113 million, up 37.8%. Operating loss was $100 million compared with $184 million in the year-ago quarter.
As of Mar 31, 2017, the International wireless subscriber base was 12.606 million, up 36.8% year over year. In the reported quarter, this segment gained a net of 647,000 wireless customers. The International video subscriber base touched 13.678 million, up 10% year over year. However, the company gained 91,000 International video customers in the reported quarter.
2017 Outlook
AT&T has projected that its consolidated revenues will witness in low-single digit growth in 2017. Adjusted EPS growth will be in the mid-single digit range. Adjusted operating margin will expand in 2017. Full year capital expenditures and free cash flow will be approximately $22 billion and $18 billion, respectively.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate have trended downward during the past month. There have been 11 downward revisions for the current quarter compared to two upward.
At this time, AT&T's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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AT&T (T) Down 5.7% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for AT&T Inc. (T - Free Report) . Shares have lost about 5.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AT&T Q1 Earnings In Line with Estimates, Revenues Miss
On a GAAP basis, AT&T reported net income of $3,469 million or $0.56 per share compared with $3,803 million or $0.61, in the year-ago quarter. Quarterly adjusted (excluding non-recurring items) earnings per share were $0.74, in line with the Zacks Consensus Estimate.
Quarterly total revenue dropped 2.9% year over year to $39,365 million but fell below the Zacks Consensus Estimate of $40,661 million. Of this, Service revenues were $36,456 million, down 1.7% and Equipment revenues were $2,909 million, down 15.3%. Total operating expenses in the reported quarter were $32,501 million, down 2.7% year over year. Operating income was $6,864 million compared with $7,131 million in the year-ago quarter.
Cash Flow & Liquidity
In the first quarter of 2017, AT&T generated $9,218 million of cash from operations compared with $7,900 million in the year-ago quarter. Free cash flow in the reported quarter was $3,203 million compared with $3,231 million a year ago.
At the end of the first quarter of 2017, AT&T had $14,884 million of cash and cash equivalents and $133,249 million of total debt outstanding compared with $5,788 million and $123,513 million, respectively, at the end of 2016. The debt-to-capitalization ratio was 0.49 at the end of the reported quarter compared with 0.48 at the end of 2016.
Business Solutions Segment
Total revenue at the segment was $16,848 million, down 4.3% year over year. Of this, Wireless service revenues totaled $7,929 million, inching up 0.9% year over year. Fixed strategic services revenues reached $2,974 million, up 8.1%. Legacy voice and data services contributed $3,630 million, down 17%. Other service & equipment generated $817 million, down 4.9% while Wireless Equipment revenues totaled $1,498 million, down 15.4%. Operating income was $4,360 million, up 1.4%. However, operating margin was 25.9% compared with 24.4% in the prior-year quarter.
As of Mar 31, 2017, the Business Solutions wireless subscriber base was 82.354 million, up 8.7% year over year. Within this, Postpaid wireless subscriber count was 50.839 million and Connected Devices were 31.439 million. In the reported quarter, this segment lost a net 125,000 postpaid wireless customers but gained 2.553 million connected devices. Business wireless postpaid churn rate was 1.07% compared with 1.02% in the year-ago quarter. Total wireline broadband connections were 1.426 million, down 4.4% year over year. IP-broadband was pegged at 980,000. Net broadband addition was 4,000.
Entertainment Group Segment
Total revenue at the segment grossed $12,623 million, inching down 0.3% year over year (post the DIRECTV acquisition). Of the total, video entertainment revenues were $9,020 million, up 1.3%. High-Speed Internet revenues were $1,941 million, up 7.7%. Legacy voice and data services contributed $1,056 million, down 19.6%. Equipment and Other service generated $606 million, down 5%. Operating income was $1,603 million in the reported quarter compared with $1,592 million in the prior-year quarter. Operating margin was 12.7%, compared with 12.6% a year ago.
As of Mar 31, 2017, total video connections at this segment were 25.032 million, down 1.2%. Of the total, Satellite connections tallied 21.012 million (up 4.5%) and U-verse connections were 4.02 million (down 23.2%). In the reported quarter, AT&T lost 233,000 U-verse customers while satellite TV customer count remains same. Total broadband connections at this segment were 14.294 million, flat year over year. Of the total, IP-broadband was pegged at 13.130 million, while DSL-broadband was 1.164 million. Total wireline voice connections were 11.003 million, down 9.2%.
Consumer Mobility Segment
Total revenue at the segment was $7,740 million, down 7.1% year over year. Of the total, Service revenues were $6,609 million, down 4.8%. Equipment revenues generated $1,131 million, down 18.3%. Operating income was $2,339 million, down 6.2%. Operating margin was 30.2% compared with 29.9% in the prior-year quarter.
As of Mar 31, 2017, the Consumer Mobility wireless subscriber base was 51.864 million, down 5.1%. Of this, postpaid wireless subscribers totaled 26.51 million and prepaid wireless customers were 13.844 million. Reseller wireless subscriber base totalled 10.549 million and Connected Devices count was 961,000. In the reported quarter, this segment gained a net of 282,000 prepaid customers and 19,000 connected devices but lost a net of 66,000 postpaid wireless customers and 588,000 resellers. Consumer Mobility postpaid churn rate was 1.22% compared with 1.24% in the year-ago quarter. Total churn rate for the segment was 2.42%, up from 2.11% in the year-ago quarter.
International Segment
Total revenue at the segment was $1,929 million, up 15.7% year over year. Within the total, Video entertainment revenues were $1,341 million, up 18.7%. Wireless service revenues were $475 million, up 4.4%. Wireless Equipment revenues were $113 million, up 37.8%. Operating loss was $100 million compared with $184 million in the year-ago quarter.
As of Mar 31, 2017, the International wireless subscriber base was 12.606 million, up 36.8% year over year. In the reported quarter, this segment gained a net of 647,000 wireless customers. The International video subscriber base touched 13.678 million, up 10% year over year. However, the company gained 91,000 International video customers in the reported quarter.
2017 Outlook
AT&T has projected that its consolidated revenues will witness in low-single digit growth in 2017. Adjusted EPS growth will be in the mid-single digit range. Adjusted operating margin will expand in 2017. Full year capital expenditures and free cash flow will be approximately $22 billion and $18 billion, respectively.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate have trended downward during the past month. There have been 11 downward revisions for the current quarter compared to two upward.
AT&T Inc. Price and Consensus
AT&T Inc. Price and Consensus | AT&T Inc. Quote
VGM Scores
At this time, AT&T's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.