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Will Lower Communications Revenues Dent AT&T (T) Q2 Earnings?
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AT&T Inc. (T - Free Report) is scheduled to report second-quarter 2020 results, before the opening bell, on Jul 23. In the second quarter, the company is likely to have recorded lower revenues year over year from the Communications segment due to the adverse impacts of the coronavirus pandemic and continued infrastructure investments for 5G deployment across the country.
Factors at Play
The Communications segment has three business units — Mobility, Entertainment Group and Business Wireline.
In the second quarter, AT&T expanded its 5G network infrastructure in various markets to take the tally to 355 markets across the country, serving 179 million people. The company introduced Dynamic Spectrum Sharing in sections of its network, coupled with 5G-enabled devices that help it share the same channel with both 4G and 5G users simultaneously, thereby creating a seamless experience for customers. These initiatives are likely to be reflected in the upcoming results.
During the to-be-reported quarter, AT&T expanded its collaboration with RingCentral to leverage its technology for online voice and video team meetings by incorporating it in its cloud-based platform — Office@Hand. This flexible cloud-based solution, which enables employees to work virtually with an advanced cost-effective communication platform, is likely to improve workforce productivity amid coronavirus-induced turmoil. Such technology collaborations are likely to have translated into higher revenues for the Business Wireline division.
However, continued infrastructure investments for extensive fiber connectivity and the deployment of a standards-based nationwide mobile 5G network are likely to have affected the bottom line. Moreover, free data plans for certain school-issued tablets, waiving of wireless voice and data overage fees for all customers and expanded eligibility for its low-income Internet program with two free months of service for new program participants are likely to have drained the exchequer.
Q2 Developments
During the quarter, AT&T closed the sale of a secondary offering to improve its liquidity position and reduce the burgeoning debt burden through the prepayment of upcoming debt maturities. The strategic move is likely to de-risk its capital structure as the company prepares to navigate through the challenging macroeconomic environment. The company also secured a $5.5-billion term loan at competitive rates with 12 banks for additional financial flexibility.
Overall Expectations
The Zacks Consensus Estimate for revenues from the Communications segment is pegged at $32,997 million, down from 35,508 million in the year-ago quarter. Revenues from Mobility, Entertainment Group and Business Wireline are pegged at $16,552 million, $10,254 million and $6,221 million, respectively, compared with $14,006 million, $11,368 million and $6,628 million reported in the prior-year quarter. Operating income from Mobility, Entertainment Group and Business Wireline are pegged at $5,845 million, $1,213 million and $1,144 million, respectively, compared with $5,833 million, $1,514 million and $1,390 million reported in the year-earlier quarter. The consensus mark for EBITDA from Mobility and Entertainment Group stands at $7,823 million and $2,545 million, respectively, down from $7,858 million and $2,853 million reported in the year-ago period. The same from Business Wireline is expected to decrease to $2,352 million from $2,646 million in the prior-year quarter.
The Zacks Consensus Estimate for total revenues of the company stands at $41,385 million, indicating a 7.9% decline from $44,957 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 78 cents per share. It had reported 89 cents in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for AT&T this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.50%, with the former being pegged at 79 cents and the latter at 78 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:
The Earnings ESP for NETGEAR, Inc. (NTGR - Free Report) is +6.67% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Jul 22.
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +27.29% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Aug 6.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
Will Lower Communications Revenues Dent AT&T (T) Q2 Earnings?
AT&T Inc. (T - Free Report) is scheduled to report second-quarter 2020 results, before the opening bell, on Jul 23. In the second quarter, the company is likely to have recorded lower revenues year over year from the Communications segment due to the adverse impacts of the coronavirus pandemic and continued infrastructure investments for 5G deployment across the country.
Factors at Play
The Communications segment has three business units — Mobility, Entertainment Group and Business Wireline.
In the second quarter, AT&T expanded its 5G network infrastructure in various markets to take the tally to 355 markets across the country, serving 179 million people. The company introduced Dynamic Spectrum Sharing in sections of its network, coupled with 5G-enabled devices that help it share the same channel with both 4G and 5G users simultaneously, thereby creating a seamless experience for customers. These initiatives are likely to be reflected in the upcoming results.
During the to-be-reported quarter, AT&T expanded its collaboration with RingCentral to leverage its technology for online voice and video team meetings by incorporating it in its cloud-based platform — Office@Hand. This flexible cloud-based solution, which enables employees to work virtually with an advanced cost-effective communication platform, is likely to improve workforce productivity amid coronavirus-induced turmoil. Such technology collaborations are likely to have translated into higher revenues for the Business Wireline division.
However, continued infrastructure investments for extensive fiber connectivity and the deployment of a standards-based nationwide mobile 5G network are likely to have affected the bottom line. Moreover, free data plans for certain school-issued tablets, waiving of wireless voice and data overage fees for all customers and expanded eligibility for its low-income Internet program with two free months of service for new program participants are likely to have drained the exchequer.
Q2 Developments
During the quarter, AT&T closed the sale of a secondary offering to improve its liquidity position and reduce the burgeoning debt burden through the prepayment of upcoming debt maturities. The strategic move is likely to de-risk its capital structure as the company prepares to navigate through the challenging macroeconomic environment. The company also secured a $5.5-billion term loan at competitive rates with 12 banks for additional financial flexibility.
Overall Expectations
The Zacks Consensus Estimate for revenues from the Communications segment is pegged at $32,997 million, down from 35,508 million in the year-ago quarter. Revenues from Mobility, Entertainment Group and Business Wireline are pegged at $16,552 million, $10,254 million and $6,221 million, respectively, compared with $14,006 million, $11,368 million and $6,628 million reported in the prior-year quarter. Operating income from Mobility, Entertainment Group and Business Wireline are pegged at $5,845 million, $1,213 million and $1,144 million, respectively, compared with $5,833 million, $1,514 million and $1,390 million reported in the year-earlier quarter. The consensus mark for EBITDA from Mobility and Entertainment Group stands at $7,823 million and $2,545 million, respectively, down from $7,858 million and $2,853 million reported in the year-ago period. The same from Business Wireline is expected to decrease to $2,352 million from $2,646 million in the prior-year quarter.
The Zacks Consensus Estimate for total revenues of the company stands at $41,385 million, indicating a 7.9% decline from $44,957 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 78 cents per share. It had reported 89 cents in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for AT&T this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.50%, with the former being pegged at 79 cents and the latter at 78 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
ATT Inc. Price and EPS Surprise
ATT Inc. price-eps-surprise | ATT Inc. Quote
Zacks Rank: AT&T currently has a Zacks Rank #3.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:
Watts Water Technologies, Inc. (WTS - Free Report) is set to release quarterly numbers on Jul 29. It has an Earnings ESP of +16.45% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for NETGEAR, Inc. (NTGR - Free Report) is +6.67% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Jul 22.
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +27.29% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Aug 6.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>