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Will Low Entertainment Revenues Dent AT&T's (T) Q3 Earnings?
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AT&T Inc. (T - Free Report) is scheduled to report third-quarter 2018 results before the opening bell on Oct 24. The company is likely to record lower revenues from the Entertainment Group segment, which accounts for a significant share of total revenues, on a year-over-year basis.
Whether this will adversely impact the company’s bottom line remains to be seen.
Key Factors
This segment provides video, high-speed broadband and voice services to residential customers in the United States. Notably, wireline and DIRECTV’s U.S. operations falls under this segment.
AT&T is facing a steady decline in linear TV subscribers and legacy services. High-Speed Internet revenues are also contracting due to legacy DSL decline, simplified pricing and bundle discount. Moreover, TV content-cost pressure, high programming costs and new video platform expenses are fast eroding margins.
The company’s wireline division is also struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. These are weighing on the company’s revenues and margins. Moreover, AT&T’s quest for faster growth will increase subscriber acquisition cost in both consumer and SMB (small and medium businesses) units and put pressure on wireline margins.
Continued cord-cutting is primarily attributable for the overall decline in revenues as consumers increasingly cancel pay TV packages for cheaper streaming options from Netflix, Amazon, Hulu and other services.
AT&T is trying hard to stem the loss through inorganic growth. The company has completed the acquisition of Time Warner for $85 billion. With assets like HBO, CNN and TNT, the deal will allow the power packed combination of AT&T’s data and Time Warner’s content to create new kinds of online videos and sell targeted advertisements to counter Verizon Communications’ Yahoo and AOL businesses. Given the scale of both AT&T and Time Warner, the merger is likely to reshape the industry dynamics, creating a media behemoth.
Despite the positives, the Zacks Consensus Estimate for revenues in the Entertainment Group segment in the to-be-reported quarter is currently pegged at $11,726 million, which is relatively lower than the year-ago reported figure of $12,648 million. The lower revenue expectations can be attributed to soft demand and cheaper competitive options. The Zacks Consensus Estimate for segment EBITDA is pegged at $2,599 million, down from $2,695 million reported in the year-earlier quarter.
Our proven model shows that AT&T is likely to beat earnings this quarter as it possesses the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.58%, with the former pegged at 94 cents and the latter at 93 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: AT&T has a Zacks Rank #3. This increases the predictive power of ESP and makes us reasonably confident of an earnings beat.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Windstream Holdings, Inc. is slated to release quarterly numbers on Nov 8. It has an Earnings ESP of +4.64% and a Zacks Rank #3.
The Earnings ESP for CenturyLink, Inc. is +6.10% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov 8.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Will Low Entertainment Revenues Dent AT&T's (T) Q3 Earnings?
AT&T Inc. (T - Free Report) is scheduled to report third-quarter 2018 results before the opening bell on Oct 24. The company is likely to record lower revenues from the Entertainment Group segment, which accounts for a significant share of total revenues, on a year-over-year basis.
Whether this will adversely impact the company’s bottom line remains to be seen.
Key Factors
This segment provides video, high-speed broadband and voice services to residential customers in the United States. Notably, wireline and DIRECTV’s U.S. operations falls under this segment.
AT&T is facing a steady decline in linear TV subscribers and legacy services. High-Speed Internet revenues are also contracting due to legacy DSL decline, simplified pricing and bundle discount. Moreover, TV content-cost pressure, high programming costs and new video platform expenses are fast eroding margins.
The company’s wireline division is also struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. These are weighing on the company’s revenues and margins. Moreover, AT&T’s quest for faster growth will increase subscriber acquisition cost in both consumer and SMB (small and medium businesses) units and put pressure on wireline margins.
Continued cord-cutting is primarily attributable for the overall decline in revenues as consumers increasingly cancel pay TV packages for cheaper streaming options from Netflix, Amazon, Hulu and other services.
AT&T is trying hard to stem the loss through inorganic growth. The company has completed the acquisition of Time Warner for $85 billion. With assets like HBO, CNN and TNT, the deal will allow the power packed combination of AT&T’s data and Time Warner’s content to create new kinds of online videos and sell targeted advertisements to counter Verizon Communications’ Yahoo and AOL businesses. Given the scale of both AT&T and Time Warner, the merger is likely to reshape the industry dynamics, creating a media behemoth.
Despite the positives, the Zacks Consensus Estimate for revenues in the Entertainment Group segment in the to-be-reported quarter is currently pegged at $11,726 million, which is relatively lower than the year-ago reported figure of $12,648 million. The lower revenue expectations can be attributed to soft demand and cheaper competitive options. The Zacks Consensus Estimate for segment EBITDA is pegged at $2,599 million, down from $2,695 million reported in the year-earlier quarter.
Overall Expectations
Total revenues for the company are expected to be $45,630 million compared with $39,668 million reported in the prior-year quarter. (Read More: Will Healthy Top-Line Growth Benefit AT&T's Q3 Earnings?)
Our proven model shows that AT&T is likely to beat earnings this quarter as it possesses the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.58%, with the former pegged at 94 cents and the latter at 93 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
AT&T Inc. Price and EPS Surprise
AT&T Inc. Price and EPS Surprise | AT&T Inc. Quote
Zacks Rank: AT&T has a Zacks Rank #3. This increases the predictive power of ESP and makes us reasonably confident of an earnings beat.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Windstream Holdings, Inc. is slated to release quarterly numbers on Nov 8. It has an Earnings ESP of +4.64% and a Zacks Rank #3.
United States Cellular Corporation (USM - Free Report) is likely to release results around Nov 14. The company has an Earnings ESP of +57.45% and sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for CenturyLink, Inc. is +6.10% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov 8.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>