Back to top

Image: Bigstock

Will Higher WarnerMedia Revenues Aid AT&'s (T) Q1 Earnings?

Read MoreHide Full Article

AT&T Inc. (T - Free Report) is scheduled to report first-quarter 2021 results, before the opening bell, on Apr 22. In the first quarter, the company is likely to have recorded higher revenues year over year from the WarnerMedia segment due to significant traction from the streaming platform of HBO Max.

Factors at Play

The WarnerMedia segment represents the various business units of the erstwhile Time Warner namely, Turner, Home Box Office and Warner Bros. It also includes AT&T’s Regional Sports Networks in the Turner division and Otter Media.

The company witnessed healthy traction in HBO Max with a steady increase in subscriber base during the quarter, buoyed by a variety of subscription options and unrivaled access to global fan-favorite programs. AT&T expects to rake in 67 million to 70 million HBO Max subscribers by the end of 2021. The company is planning to expand this streaming service in 39 international markets in late June and in additional 21 markets in the second half of 2021. These are likely to have positively impacted first-quarter performance.

With higher customer adoption, the segment revenues are likely to have swelled during the quarter. Moreover, HBO Max boasts a higher-than-average price of $15 a month and is, therefore, reportedly making more money than some of its streaming rivals. In addition, with live sports and events resuming in the quarter, TV advertisers have returned to the fore. Further, intermittent movie releases and series for both traditional TV and streaming services are expected to have buoyed top-line growth. However, adverse foreign currency translations, evolving market conditions in the aftermath of the deadly virus outbreak and continued investments in HBO Max for new content production, foregone licensing revenues and platform costs are likely to have led to soft margins.

Key Q1 Developments

During the quarter, AT&T unveiled plans for an expansive content to address the complete spectrum of kids and families, including preschoolers and adolescents. The company is creating more than 300 hours of original series and special shows that will debut on its global Cartoon Network channels and HBO Max beginning later this year. These new originals are in addition to more than 3,000 hours of premium library content set to be offered across WarnerMedia’s platforms. The company is also planning to extend Game of Thrones into animation and held discussions with writers during the quarter.

Overall Expectations

The Zacks Consensus Estimate for revenues from WarnerMedia is pegged at $8,226 million, indicating an improvement from $7,359 million reported in the year-ago quarter. Operating income is pegged at $1,902 million, implying a rise from $1,699 million reported in the prior-year quarter. The consensus mark for EBITDA from the segment stands at $2,130 million, suggesting growth from $1,842 million.

The Zacks Consensus Estimate for total revenues of the company stands at $42,260 million, indicating a 1.2% decline from $42,779 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 77 cents per share. It had reported 84 cents in the year-earlier quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for AT&T for the first quarter. 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 not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.59%. 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. price-eps-surprise | AT&T Inc. Quote

Zacks Rank: AT&T has a Zacks Rank #3.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

NETGEAR, Inc. (NTGR - Free Report) is set to release quarterly numbers on Apr 21. It has an Earnings ESP of +1.52% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Verizon Communications Inc. (VZ - Free Report) is +0.41% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Apr 21.

The Earnings ESP for T-Mobile US Inc. (TMUS - Free Report) is +5.45% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on May 5.

+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.

Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.

Click here to download this report FREE >>