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AT&T (T) Beats on Q4 Earnings & Revenues, Issues '18 Outlook
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AT&T (T - Free Report) reported impressive fourth-quarter 2017 financial results, with the top and the bottom lines beating the Zacks Consensus Estimate. The company reported net gain of 4.1 million total wireless subscribers, with 2.7 million in the United States (driven by connected devices, postpaid phones and prepaid) and 1.3 million in Mexico.
AT&T continues to struggle in the competitive and almost-saturated U.S. wireless market with incumbents like Verizon Communications (VZ - Free Report) , T-Mobile US (TMUS - Free Report) and Sprint (S - Free Report) . The industry is likely to witness more competition in 2018 with the entry of cable MSOs (multi service operators). Comcast already entered this space with Xfinity Mobile offering. Charter Communications reiterated plans to launching wireless service in the first half of 2018.
Net Income
On a GAAP basis, AT&T reported net income of $19,037 million or $3.08 cents per share compared with $2,437 million or 39 cents from the year-ago quarter. Quarterly adjusted (excluding non-recurring items) earnings came in at 78 cents, surpassing the Zacks Consensus Estimate of 65 cents. The bottom line grew 18.2% on a year-over-year basis.
Quarterly total revenues declined 0.39% year over year to $41,676 million, primarily due to declines in video subscriptions. However, revenues beat the Zacks Consensus Estimate of $41,192.9 million.
Of the total, Services revenues were $36,225 million, down 3.1% year over year. Equipment revenues were $5,451 million, up 21.9% year over year.
Operating Metrics
Total operating expenses in fourth-quarter 2017 were $41,317 million compared with $37,593 million in the prior-year quarter. Operating income was $359 million compared with $4,248 million in the year-ago quarter. EBITDA was 6,430 million compared with $10,377 million in the prior-year quarter. EBITDA margin was 15.4% compared with 24.8% in the prior-year quarter.
Cash Flow & Liquidity
In fourth-quarter 2017, AT&T generated $9,877 million of cash from operations compared with $10,142 million from the prior-year quarter. Free cash flow in the reported quarter was $4,801 million compared with $3,686 million in the year-ago quarter.
AT&T had $50,498 million of cash and cash equivalents compared with $5,788 million at the end of 2016. The company had $125,972 million of total debt outstanding compared with $113,681 million at the end of 2016.
Business Solutions Segment
Total revenues in the segment were $18,390 million, up 2% year over year. Of this, Wireless service revenues totaled $7,933 million, down 0.6% year over year. Wireless Equipment revenues totaled $3,022 million, up 28.7%. Fixed strategic services revenues were $3,138 million, up 5.9%. Legacy voice and data services contributed $3,359 million, declining 11.4%. Other service & equipment generated $938 million, down 1%.
Operating income was $3,829 million compared with $4,023 million in the year-ago quarter. Operating margin was 20.8% compared with 22.3% in the prior-year quarter. EBITDA was $6,183 million against $6,287 million in the year-ago quarter. EBITDA margin was 33.6% versus 34.9% in the year-ago quarter.
As of Dec 31, 2017, Business Solutions wireless subscriber base was 90.432 million, up 11.1% year over year. Of this, postpaid wireless subscriber count was 51.811 million, up 2.2%, Connected Devices were 38.534 million, up 25.7% and Reseller subscribers were 87,000, up 33.8%. In the reported quarter, this segment gained net 221,000 postpaid wireless customers, 2.624 million connected devices and 4,000 Reseller customers.
Business wireless postpaid churn rate was 1.08% compared with 1.11% in the year-ago quarter. Total IP broadband connections were 1.025 million, up 4.9% year over year.
Entertainment Group Segment
Total revenues at the segment grossed $12,745 million, deteriorating 3.5% year over year. Of the total, video entertainment revenues were $9,355 million, down 2.2%. High-Speed Internet revenues were $1,890 million, down 1.0%. Legacy voice and data services contributed $910 million, down 17.6%. Equipment and Other service generated $590 million, down 5.6%.
Operating income was $1,070 million in the reported quarter compared with $1,362 million in the prior-year quarter. Operating margin was 8.4% compared with 10.3% in the year-ago quarter. EBITDA was $2,437 million against $2,743 million in the year-ago quarter. EBITDA margin was 19.1% versus 20.8% in the year-ago quarter.
As of Dec 31, 2017, total video connections in this segment were 25.244 million, down 1.1%. Of the total, Satellite connections tallied 20.458 million, down 2.6%. U-verse connections were 3.631 million, down 14.6%. DIRECTV NOW connections were 1.155 million. In the reported quarter, AT&T lost 147,000 satellite TV customers and 60,000 U-verse TV customers. However, it gained 368,000 DIRECTV NOW connections.
Total broadband connections in this segment were 14.350 million, up 1.2% year over year. Of the total, IP-broadband was 13.462 million, while DSL-broadband was 0.888 million. The company gained a net of 95,000 IP broadband customers but lost 76,000 DSL broadband customers. Total wireline voice connections were 9.996 million, down 11.4% year over year.
Consumer Mobility Segment
Total revenues in the segment were $8,273 million, reflecting a decline of 1.7% year over year. Of the total, Service revenues were $6,409 million, down 4.8%. Equipment revenues generated $1,864 million, increasing 10.4%.
Operating income was $2,020 million, down 7.6% year over year. Operating margin was 24.4% compared with 26.0% in the prior-year quarter. EBITDA was $2,906 million against $3,103 million in the year-ago quarter. EBITDA margin was 35.1% versus 36.9% in the year-ago quarter.
As of Dec 31, 2017, the Consumer Mobility wireless subscriber base was 51.135 million, reflecting a decline of 4.3%. Of this, postpaid wireless subscribers totaled 26.064 million (down 3.8%) and prepaid wireless customers were 15.335 million (up 13.3%). Branded customer base was 41.399 million (up 1.9%) and Reseller and Connected Devices subscriber base totaled 9.736 million (down 24.1%).
In the reported quarter, this segment gained a net of 320,000 postpaid wireless customers, 140,000 prepaid wireless customers and 460,000 branded customers. However, the company lost a net of 568,000 resellers and connected devices subscribers. Consumer Mobility postpaid churn rate was 1.18% compared with 1.25% in the year-ago quarter. Total churn rate for the segment was 2.48%, up from 2.43% in the year-ago quarter.
International Segment
Total revenues at the segment were $2,215 million, up 16% year over year. Video entertainment revenues were $1,391 million, reflecting an increase of 10.3%. Wireless service revenues were $501 million, up 5%. Wireless Equipment revenues were $323 million, up 88.9%.
Operating loss in this segment was $34 million compared with a loss of $268 million in the year-ago quarter. EBITDA was $279 million against $30 million in the year-ago quarter. EBITDA margin was 12.6% versus 1.6% in the year-ago quarter.
The International wireless subscriber base was 15.099 million, up 26.1% year over year. In the reported quarter, this segment gained a net of 1,320,000 wireless customers. The International video subscriber base touched 13.629 million, up 9.4% year over year. The company gained 139,000 International video customers in the reported quarter.
2018 Outlook
AT&T (on a standalone basis) has provided a guidance for 2018, including the impacts of tax reform. The company projects earnings of $3.50 per share (on an adjusted basis) with free cash flow of about $21 billion. Capital expenditures are expected at around $25 billion. The company expects to gain $23 billion of net reimbursements from the FirstNet Project which includes $1 billion of incremental tax reform investments.
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AT&T (T) Beats on Q4 Earnings & Revenues, Issues '18 Outlook
AT&T (T - Free Report) reported impressive fourth-quarter 2017 financial results, with the top and the bottom lines beating the Zacks Consensus Estimate. The company reported net gain of 4.1 million total wireless subscribers, with 2.7 million in the United States (driven by connected devices, postpaid phones and prepaid) and 1.3 million in Mexico.
AT&T carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AT&T continues to struggle in the competitive and almost-saturated U.S. wireless market with incumbents like Verizon Communications (VZ - Free Report) , T-Mobile US (TMUS - Free Report) and Sprint (S - Free Report) . The industry is likely to witness more competition in 2018 with the entry of cable MSOs (multi service operators). Comcast already entered this space with Xfinity Mobile offering. Charter Communications reiterated plans to launching wireless service in the first half of 2018.
Net Income
On a GAAP basis, AT&T reported net income of $19,037 million or $3.08 cents per share compared with $2,437 million or 39 cents from the year-ago quarter. Quarterly adjusted (excluding non-recurring items) earnings came in at 78 cents, surpassing the Zacks Consensus Estimate of 65 cents. The bottom line grew 18.2% on a year-over-year basis.
AT&T Inc. Price, Consensus and EPS Surprise
AT&T Inc. Price, Consensus and EPS Surprise | AT&T Inc. Quote
Revenues
Quarterly total revenues declined 0.39% year over year to $41,676 million, primarily due to declines in video subscriptions. However, revenues beat the Zacks Consensus Estimate of $41,192.9 million.
Of the total, Services revenues were $36,225 million, down 3.1% year over year. Equipment revenues were $5,451 million, up 21.9% year over year.
Operating Metrics
Total operating expenses in fourth-quarter 2017 were $41,317 million compared with $37,593 million in the prior-year quarter. Operating income was $359 million compared with $4,248 million in the year-ago quarter. EBITDA was 6,430 million compared with $10,377 million in the prior-year quarter. EBITDA margin was 15.4% compared with 24.8% in the prior-year quarter.
Cash Flow & Liquidity
In fourth-quarter 2017, AT&T generated $9,877 million of cash from operations compared with $10,142 million from the prior-year quarter. Free cash flow in the reported quarter was $4,801 million compared with $3,686 million in the year-ago quarter.
AT&T had $50,498 million of cash and cash equivalents compared with $5,788 million at the end of 2016. The company had $125,972 million of total debt outstanding compared with $113,681 million at the end of 2016.
Business Solutions Segment
Total revenues in the segment were $18,390 million, up 2% year over year. Of this, Wireless service revenues totaled $7,933 million, down 0.6% year over year. Wireless Equipment revenues totaled $3,022 million, up 28.7%. Fixed strategic services revenues were $3,138 million, up 5.9%. Legacy voice and data services contributed $3,359 million, declining 11.4%. Other service & equipment generated $938 million, down 1%.
Operating income was $3,829 million compared with $4,023 million in the year-ago quarter. Operating margin was 20.8% compared with 22.3% in the prior-year quarter. EBITDA was $6,183 million against $6,287 million in the year-ago quarter. EBITDA margin was 33.6% versus 34.9% in the year-ago quarter.
As of Dec 31, 2017, Business Solutions wireless subscriber base was 90.432 million, up 11.1% year over year. Of this, postpaid wireless subscriber count was 51.811 million, up 2.2%, Connected Devices were 38.534 million, up 25.7% and Reseller subscribers were 87,000, up 33.8%. In the reported quarter, this segment gained net 221,000 postpaid wireless customers, 2.624 million connected devices and 4,000 Reseller customers.
Business wireless postpaid churn rate was 1.08% compared with 1.11% in the year-ago quarter. Total IP broadband connections were 1.025 million, up 4.9% year over year.
Entertainment Group Segment
Total revenues at the segment grossed $12,745 million, deteriorating 3.5% year over year. Of the total, video entertainment revenues were $9,355 million, down 2.2%. High-Speed Internet revenues were $1,890 million, down 1.0%. Legacy voice and data services contributed $910 million, down 17.6%. Equipment and Other service generated $590 million, down 5.6%.
Operating income was $1,070 million in the reported quarter compared with $1,362 million in the prior-year quarter. Operating margin was 8.4% compared with 10.3% in the year-ago quarter. EBITDA was $2,437 million against $2,743 million in the year-ago quarter. EBITDA margin was 19.1% versus 20.8% in the year-ago quarter.
As of Dec 31, 2017, total video connections in this segment were 25.244 million, down 1.1%. Of the total, Satellite connections tallied 20.458 million, down 2.6%. U-verse connections were 3.631 million, down 14.6%. DIRECTV NOW connections were 1.155 million. In the reported quarter, AT&T lost 147,000 satellite TV customers and 60,000 U-verse TV customers. However, it gained 368,000 DIRECTV NOW connections.
Total broadband connections in this segment were 14.350 million, up 1.2% year over year. Of the total, IP-broadband was 13.462 million, while DSL-broadband was 0.888 million. The company gained a net of 95,000 IP broadband customers but lost 76,000 DSL broadband customers. Total wireline voice connections were 9.996 million, down 11.4% year over year.
Consumer Mobility Segment
Total revenues in the segment were $8,273 million, reflecting a decline of 1.7% year over year. Of the total, Service revenues were $6,409 million, down 4.8%. Equipment revenues generated $1,864 million, increasing 10.4%.
Operating income was $2,020 million, down 7.6% year over year. Operating margin was 24.4% compared with 26.0% in the prior-year quarter. EBITDA was $2,906 million against $3,103 million in the year-ago quarter. EBITDA margin was 35.1% versus 36.9% in the year-ago quarter.
As of Dec 31, 2017, the Consumer Mobility wireless subscriber base was 51.135 million, reflecting a decline of 4.3%. Of this, postpaid wireless subscribers totaled 26.064 million (down 3.8%) and prepaid wireless customers were 15.335 million (up 13.3%). Branded customer base was 41.399 million (up 1.9%) and Reseller and Connected Devices subscriber base totaled 9.736 million (down 24.1%).
In the reported quarter, this segment gained a net of 320,000 postpaid wireless customers, 140,000 prepaid wireless customers and 460,000 branded customers. However, the company lost a net of 568,000 resellers and connected devices subscribers. Consumer Mobility postpaid churn rate was 1.18% compared with 1.25% in the year-ago quarter. Total churn rate for the segment was 2.48%, up from 2.43% in the year-ago quarter.
International Segment
Total revenues at the segment were $2,215 million, up 16% year over year. Video entertainment revenues were $1,391 million, reflecting an increase of 10.3%. Wireless service revenues were $501 million, up 5%. Wireless Equipment revenues were $323 million, up 88.9%.
Operating loss in this segment was $34 million compared with a loss of $268 million in the year-ago quarter. EBITDA was $279 million against $30 million in the year-ago quarter. EBITDA margin was 12.6% versus 1.6% in the year-ago quarter.
The International wireless subscriber base was 15.099 million, up 26.1% year over year. In the reported quarter, this segment gained a net of 1,320,000 wireless customers. The International video subscriber base touched 13.629 million, up 9.4% year over year. The company gained 139,000 International video customers in the reported quarter.
2018 Outlook
AT&T (on a standalone basis) has provided a guidance for 2018, including the impacts of tax reform. The company projects earnings of $3.50 per share (on an adjusted basis) with free cash flow of about $21 billion. Capital expenditures are expected at around $25 billion. The company expects to gain $23 billion of net reimbursements from the FirstNet Project which includes $1 billion of incremental tax reform investments.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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