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Will Higher WarnerMedia Revenues Drive AT&T (T) Q2 Earnings?
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AT&T Inc. (T - Free Report) is scheduled to report second-quarter 2021 results, before the opening bell, on Jul 22. In the second 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 has launched this streaming service in 39 international markets in late June and intends to introduce it in additional 21 markets in the second half of 2021. These are likely to have positively impacted its second-quarter performance.
With higher customer adoption, the segment revenues are likely to have increased 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. Intermittent movie releases and series for both traditional TV and streaming services are also 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 Q2 Developments
AT&T inked a definitive agreement with Discovery, Inc. to spin off its media assets and merge them with the complementary assets of the latter to form a standalone global entertainment company amid continuous cord-cutting in U.S. households. AT&T will receive $43 billion in a combination of cash and debt securities and will own 71% of the new entity. The transaction is expected to enable the carrier to trim its huge debt burden and focus on core businesses. The cash resources are likely to be utilized to augment its network infrastructure throughout the country and expand its fiber footprint.
The separation of the media assets are likely to offer the company an opportunity to better align its communications business with a focused total return capital allocation strategy. Moreover, a focused entertainment company is likely to be better placed to capitalize on the booming direct-to-consumer (DTC) streaming services market and unlock value from media assets. This, in turn, could help it to reinvest in the new entity for more content and digital innovation in order to scale the global DTC business. The transaction, anticipated to close in mid-2022, is expected to generate cost synergies of $3 billion per year resulting from technology, marketing and platform savings with consolidation of DTC capabilities and elimination of duplicate initiatives.
Overall Expectations
The Zacks Consensus Estimate for revenues from WarnerMedia is pegged at $8,430 million, indicating an improvement from $6,814 million reported in the year-ago quarter. Operating income is pegged at $1,808 million, implying a decline from $1,913 million reported in the prior-year quarter. The consensus mark for EBITDA from the segment stands at $2,034 million, suggesting slight fall from $2,080 million.
The Zacks Consensus Estimate for total revenues of the company stands at $42,649 million, indicating an improvement from $40,950 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 78 cents per share. It had reported 83 cents in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for AT&T for the second 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 perfectly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.83% with the former pegged at 79 cents and the latter at 78. 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 Verizon Communications Inc. (VZ - Free Report) is +1.63% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Jul 21.
The Earnings ESP for T-Mobile US Inc. (TMUS - Free Report) is +13.75% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Aug 5.
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Will Higher WarnerMedia Revenues Drive AT&T (T) Q2 Earnings?
AT&T Inc. (T - Free Report) is scheduled to report second-quarter 2021 results, before the opening bell, on Jul 22. In the second 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 has launched this streaming service in 39 international markets in late June and intends to introduce it in additional 21 markets in the second half of 2021. These are likely to have positively impacted its second-quarter performance.
With higher customer adoption, the segment revenues are likely to have increased 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. Intermittent movie releases and series for both traditional TV and streaming services are also 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 Q2 Developments
AT&T inked a definitive agreement with Discovery, Inc. to spin off its media assets and merge them with the complementary assets of the latter to form a standalone global entertainment company amid continuous cord-cutting in U.S. households. AT&T will receive $43 billion in a combination of cash and debt securities and will own 71% of the new entity. The transaction is expected to enable the carrier to trim its huge debt burden and focus on core businesses. The cash resources are likely to be utilized to augment its network infrastructure throughout the country and expand its fiber footprint.
The separation of the media assets are likely to offer the company an opportunity to better align its communications business with a focused total return capital allocation strategy. Moreover, a focused entertainment company is likely to be better placed to capitalize on the booming direct-to-consumer (DTC) streaming services market and unlock value from media assets. This, in turn, could help it to reinvest in the new entity for more content and digital innovation in order to scale the global DTC business. The transaction, anticipated to close in mid-2022, is expected to generate cost synergies of $3 billion per year resulting from technology, marketing and platform savings with consolidation of DTC capabilities and elimination of duplicate initiatives.
Overall Expectations
The Zacks Consensus Estimate for revenues from WarnerMedia is pegged at $8,430 million, indicating an improvement from $6,814 million reported in the year-ago quarter. Operating income is pegged at $1,808 million, implying a decline from $1,913 million reported in the prior-year quarter. The consensus mark for EBITDA from the segment stands at $2,034 million, suggesting slight fall from $2,080 million.
The Zacks Consensus Estimate for total revenues of the company stands at $42,649 million, indicating an improvement from $40,950 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 78 cents per share. It had reported 83 cents in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for AT&T for the second 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 perfectly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.83% with the former pegged at 79 cents and the latter at 78. 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-eps-surprise | AT&T Inc. Quote
Zacks Rank: AT&T 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:
Nokia Corporation (NOK - Free Report) is set to release quarterly numbers on Jul 30. It has an Earnings ESP of +9.09% 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 +1.63% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Jul 21.
The Earnings ESP for T-Mobile US Inc. (TMUS - Free Report) is +13.75% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Aug 5.