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AT&T (T) Tops Q4 Earnings Estimates, Falters on Revenues
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AT&T Inc. (T - Free Report) reported solid fourth-quarter 2022 results as healthy wireless traction and customer additions was partially offset by lower contribution from divested businesses and lower demand for legacy voice and data services. The company recorded solid subscriber growth backed by a resilient business model and robust cash flow position driven by a diligent execution of operational plans. AT&T expects to continue investing in key areas of 5G and fiber and adjust its business according to the evolving market scenario to fuel long-term growth, while maintaining a healthy dividend payment and actively pruning debt.
Net Income
On a GAAP basis, AT&T reported net loss of $23,120 million or loss of $3.20 per share from continued operations against net income of $5,202 million or 67 cents per share in the year-ago quarter. The significant year-over-year decline was primarily attributable to non-cash goodwill impairments and asset abandonments and restructuring charges totaling $26,753 million.
Excluding non-recurring items, adjusted earnings were 61 cents per share compared with 56 cents in the year-earlier quarter. Adjusted earnings for the fourth quarter beat the Zacks Consensus Estimate by a couple of cents.
For 2022, AT&T reported net loss of $6,874 million or loss of $1.10 per share from continued operations against net income of $23,776 million or $3.07 per share in 2021.
Quarterly GAAP operating revenues increased 0.8% year over year to $31,343 million, largely due to higher Mobility, Mexico and Consumer Wireline revenues, partially offset by lower revenues from Business Wireline services. The top line missed the consensus mark of $31,411 million. GAAP operating revenues for 2022 were down 9.9% year over year to $120,741 million.
Adjusted operating income for the quarter was $5,652 million compared with $5,008 million in the prior-year quarter. This resulted in respective adjusted operating income margins of 18% and 16.1%. Adjusted EBITDA improved to $10,231 million from $9,480 million.
AT&T witnessed solid subscriber momentum with 1,104,000 post-paid net additions. This included 656,000 postpaid wireless phone additions. Postpaid churn was 1.01% compared with 1.02% in the year-ago quarter. Postpaid phone-only average revenue per user (ARPU) increased 2.5% year over year to $55.43 due to improved international roaming and shift to higher-priced unlimited plans. AT&T is currently covering 150 million people with mid-band 5G spectrum, well exceeding its target of reaching 130 million people by the end of year.
Segmental Performance
Communications: Total segment operating revenues were up marginally to $30,365 million as decline in Business Wireline (down 4.5% to $5,635 million) was offset by a gain in the Mobility business (up 1.7% to $21,501 million) and Consumer Wireline (up 2.2% to $3,229 million). Service revenues from the Mobility unit improved 5.2% to $15,434 million driven by solid subscriber gains, while equipment revenues declined 6.3% year over year to $6,067 million driven by lower volumes owing to challenging macroeconomic environment. Revenues from Consumer Wireline business were up due to gain in fiber broadband. AT&T recorded net fiber additions of 280,000 and has the ability to serve 19 million customer locations in more than 100 U.S. metro areas with fiber. Revenues from Business Wireline were down due to decline in legacy products as customers shifted to more advanced IP-based offerings.
Segment operating income was $7,221 million compared with $6,410 million in the year-ago quarter for respective operating margin of 23.8% and 21.2%. Adjusted EBITDA was $11,479 million compared with $10,566 million in the year-ago quarter.
Latin America: Total operating revenues were $861 million, up 22.3% year over year, due to growth in service and equipment revenues driven by favorable currency impact and higher sales. EBITDA improved to $85 million from $36 million in the year-ago quarter for respective margins of 9.9% and 5.1%.
Cash Flow & Liquidity
AT&T generated $35,812 million of cash from operations in 2022 compared with $37,170 million in the prior-year period. Free cash flow at quarter end was $6,103 million compared with $5,323 million in the year-ago period, bringing the tally for 2022 and 2021 at $14,138 million and $18,352 million, respectively. As of Dec 31, 2022, AT&T had $3,701 million of cash and cash equivalents with long-term debt of $128,423 million compared with respective figures of $19,223 million and $151,011 million in the year-ago period. Net debt to adjusted EBITDA was about 3.19x.
Outlook
As a standalone company, AT&T expects wireless service and broadband revenues for 2023 to grow more than 4% and 5% year over year, respectively. Adjusted earnings are likely to be in the range of $2.35-$2.45 per share or higher, while free cash flow is expected to be in the vicinity of $16 billion due to cost savings. While optimizing operations, it is aiming to increase efficiencies to lower operating costs, while focusing on 5G and fiber-based connectivity along with expanded reach of software-based entertainment platforms. The company is also aiming to reduce its debt burden by monetizing non-core assets.
Here are some better-ranked stocks from the broader industry.
Ooma Inc. (OOMA - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 21.7%, on average, in the trailing four quarters. Earnings estimates for Ooma for the current year have moved up 43.2% since March 2022.
Ooma offers communications services and related technologies for businesses and consumers in the United States and Canada. It helps to create powerful connected experiences for businesses and consumers through its smart cloud-based SaaS platform.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
TESSCO Technologies Incorporated , carrying a Zacks Rank #2, delivered an earnings surprise of 126.1%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 44.3% since January 2022.
TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.
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AT&T (T) Tops Q4 Earnings Estimates, Falters on Revenues
AT&T Inc. (T - Free Report) reported solid fourth-quarter 2022 results as healthy wireless traction and customer additions was partially offset by lower contribution from divested businesses and lower demand for legacy voice and data services. The company recorded solid subscriber growth backed by a resilient business model and robust cash flow position driven by a diligent execution of operational plans. AT&T expects to continue investing in key areas of 5G and fiber and adjust its business according to the evolving market scenario to fuel long-term growth, while maintaining a healthy dividend payment and actively pruning debt.
Net Income
On a GAAP basis, AT&T reported net loss of $23,120 million or loss of $3.20 per share from continued operations against net income of $5,202 million or 67 cents per share in the year-ago quarter. The significant year-over-year decline was primarily attributable to non-cash goodwill impairments and asset abandonments and restructuring charges totaling $26,753 million.
Excluding non-recurring items, adjusted earnings were 61 cents per share compared with 56 cents in the year-earlier quarter. Adjusted earnings for the fourth quarter beat the Zacks Consensus Estimate by a couple of cents.
For 2022, AT&T reported net loss of $6,874 million or loss of $1.10 per share from continued operations against net income of $23,776 million or $3.07 per share in 2021.
AT&T Inc. Price, Consensus and EPS Surprise
AT&T Inc. price-consensus-eps-surprise-chart | AT&T Inc. Quote
Quarter Details
Quarterly GAAP operating revenues increased 0.8% year over year to $31,343 million, largely due to higher Mobility, Mexico and Consumer Wireline revenues, partially offset by lower revenues from Business Wireline services. The top line missed the consensus mark of $31,411 million. GAAP operating revenues for 2022 were down 9.9% year over year to $120,741 million.
Adjusted operating income for the quarter was $5,652 million compared with $5,008 million in the prior-year quarter. This resulted in respective adjusted operating income margins of 18% and 16.1%. Adjusted EBITDA improved to $10,231 million from $9,480 million.
AT&T witnessed solid subscriber momentum with 1,104,000 post-paid net additions. This included 656,000 postpaid wireless phone additions. Postpaid churn was 1.01% compared with 1.02% in the year-ago quarter. Postpaid phone-only average revenue per user (ARPU) increased 2.5% year over year to $55.43 due to improved international roaming and shift to higher-priced unlimited plans. AT&T is currently covering 150 million people with mid-band 5G spectrum, well exceeding its target of reaching 130 million people by the end of year.
Segmental Performance
Communications: Total segment operating revenues were up marginally to $30,365 million as decline in Business Wireline (down 4.5% to $5,635 million) was offset by a gain in the Mobility business (up 1.7% to $21,501 million) and Consumer Wireline (up 2.2% to $3,229 million). Service revenues from the Mobility unit improved 5.2% to $15,434 million driven by solid subscriber gains, while equipment revenues declined 6.3% year over year to $6,067 million driven by lower volumes owing to challenging macroeconomic environment. Revenues from Consumer Wireline business were up due to gain in fiber broadband. AT&T recorded net fiber additions of 280,000 and has the ability to serve 19 million customer locations in more than 100 U.S. metro areas with fiber. Revenues from Business Wireline were down due to decline in legacy products as customers shifted to more advanced IP-based offerings.
Segment operating income was $7,221 million compared with $6,410 million in the year-ago quarter for respective operating margin of 23.8% and 21.2%. Adjusted EBITDA was $11,479 million compared with $10,566 million in the year-ago quarter.
Latin America: Total operating revenues were $861 million, up 22.3% year over year, due to growth in service and equipment revenues driven by favorable currency impact and higher sales. EBITDA improved to $85 million from $36 million in the year-ago quarter for respective margins of 9.9% and 5.1%.
Cash Flow & Liquidity
AT&T generated $35,812 million of cash from operations in 2022 compared with $37,170 million in the prior-year period. Free cash flow at quarter end was $6,103 million compared with $5,323 million in the year-ago period, bringing the tally for 2022 and 2021 at $14,138 million and $18,352 million, respectively. As of Dec 31, 2022, AT&T had $3,701 million of cash and cash equivalents with long-term debt of $128,423 million compared with respective figures of $19,223 million and $151,011 million in the year-ago period. Net debt to adjusted EBITDA was about 3.19x.
Outlook
As a standalone company, AT&T expects wireless service and broadband revenues for 2023 to grow more than 4% and 5% year over year, respectively. Adjusted earnings are likely to be in the range of $2.35-$2.45 per share or higher, while free cash flow is expected to be in the vicinity of $16 billion due to cost savings. While optimizing operations, it is aiming to increase efficiencies to lower operating costs, while focusing on 5G and fiber-based connectivity along with expanded reach of software-based entertainment platforms. The company is also aiming to reduce its debt burden by monetizing non-core assets.
Zacks Rank & Stock to Consider
AT&T currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here are some better-ranked stocks from the broader industry.
Ooma Inc. (OOMA - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 21.7%, on average, in the trailing four quarters. Earnings estimates for Ooma for the current year have moved up 43.2% since March 2022.
Ooma offers communications services and related technologies for businesses and consumers in the United States and Canada. It helps to create powerful connected experiences for businesses and consumers through its smart cloud-based SaaS platform.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
TESSCO Technologies Incorporated , carrying a Zacks Rank #2, delivered an earnings surprise of 126.1%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 44.3% since January 2022.
TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.