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Will Marginal Top-Line Growth Buoy AT&T's (T) Q4 Earnings?
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AT&T Inc. (T - Free Report) is scheduled to report fourth-quarter 2023 results on Jan 24, before the opening bell. In the last reported quarter, the adjusted earnings beat the Zacks Consensus Estimate by a penny.
The company is expected to have witnessed a top-line improvement year over year on healthy wireless traction, driven by steady investments for 5G expansion and fiber broadband infrastructure development.
Factors at Play
During the fourth quarter, AT&T continued to expand its 5G network coverage in rural and urban areas nationwide. It is heavily investing in enhancing network capacity and improving the resiliency of the existing infrastructure. AT&T expects to deploy mid-band spectrum to 200 million users by year-end 2023 and reach more than 30 million customer and business locations with fiber by the end of 2025. The extensive fiber footprint is likely to minimize its maintenance and repair costs while generating higher ARPU. Moreover, higher fiber penetrations in hitherto underserved markets are likely to be reflected in the fourth-quarter results.
With a disciplined and sustainable go-to-market strategy, AT&T is likely to have witnessed solid postpaid phone additions backed by healthy demand trends and improved quality of service. In addition, the convergence of scaled wireless and fiber networks is likely to have yielded economic benefits with multiple services under a single platform – 5G, fiber and fixed wireless access. Postpaid phone net additions in the fourth quarter are expected to have grown sequentially to around 500,000. The company also expects fiber net adds in the 250,000 range, which is reflective of normal seasonality. These are likely to have translated into incremental revenues in the upcoming quarter.
In the fourth quarter, AT&T inked a five-year contract with Ericsson to modernize its network infrastructure. AT&T intends to leverage Ericsson technology to deploy a commercial-scale open radio access network (Open RAN) across the country to help build a more robust ecosystem of network infrastructure providers and suppliers.
The Open RAN architecture facilitates healthy competition among vendors for the supply of essential components and reduces dependence on a single manufacturer. It is likely to offer more flexibility, lower costs and help develop novel ideas to monetize the network. These initiatives are likely to have had a favorable impact on the company’s fourth-quarter performance.
Our estimate for revenues from the Communications segment is pegged at $30,326.4 million, while that from the Latin America segment is $987.5 million.
However, AT&T is facing stiff competition in the wireless market from other major carriers that are aggressively expanding their networks and improving their offerings. Consumer’s tendency to switch to various streaming services is hurting company’s top line. It also has a large debt burden, which dents its competitiveness and limits growth potential. In addition, a challenging macroeconomic environment, inflationary pressures and business uncertainty are forcing consumers to have a conservative approach to higher-tier services.
The Zacks Consensus Estimate for total revenues is pegged at $31,459 million, indicating a marginal increase from $31,343 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 55 cents per share. It had reported earnings of 61 cents per share in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for AT&T for the fourth 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 exactly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.30%, with the former pegged at 56 cents and the latter at 55 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 Silicon Motion Technology Corporation (SIMO - Free Report) is +4.92% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 6.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +4.58% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 1.
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Will Marginal Top-Line Growth Buoy AT&T's (T) Q4 Earnings?
AT&T Inc. (T - Free Report) is scheduled to report fourth-quarter 2023 results on Jan 24, before the opening bell. In the last reported quarter, the adjusted earnings beat the Zacks Consensus Estimate by a penny.
The company is expected to have witnessed a top-line improvement year over year on healthy wireless traction, driven by steady investments for 5G expansion and fiber broadband infrastructure development.
Factors at Play
During the fourth quarter, AT&T continued to expand its 5G network coverage in rural and urban areas nationwide. It is heavily investing in enhancing network capacity and improving the resiliency of the existing infrastructure. AT&T expects to deploy mid-band spectrum to 200 million users by year-end 2023 and reach more than 30 million customer and business locations with fiber by the end of 2025. The extensive fiber footprint is likely to minimize its maintenance and repair costs while generating higher ARPU. Moreover, higher fiber penetrations in hitherto underserved markets are likely to be reflected in the fourth-quarter results.
With a disciplined and sustainable go-to-market strategy, AT&T is likely to have witnessed solid postpaid phone additions backed by healthy demand trends and improved quality of service. In addition, the convergence of scaled wireless and fiber networks is likely to have yielded economic benefits with multiple services under a single platform – 5G, fiber and fixed wireless access. Postpaid phone net additions in the fourth quarter are expected to have grown sequentially to around 500,000. The company also expects fiber net adds in the 250,000 range, which is reflective of normal seasonality. These are likely to have translated into incremental revenues in the upcoming quarter.
In the fourth quarter, AT&T inked a five-year contract with Ericsson to modernize its network infrastructure. AT&T intends to leverage Ericsson technology to deploy a commercial-scale open radio access network (Open RAN) across the country to help build a more robust ecosystem of network infrastructure providers and suppliers.
The Open RAN architecture facilitates healthy competition among vendors for the supply of essential components and reduces dependence on a single manufacturer. It is likely to offer more flexibility, lower costs and help develop novel ideas to monetize the network. These initiatives are likely to have had a favorable impact on the company’s fourth-quarter performance.
Our estimate for revenues from the Communications segment is pegged at $30,326.4 million, while that from the Latin America segment is $987.5 million.
However, AT&T is facing stiff competition in the wireless market from other major carriers that are aggressively expanding their networks and improving their offerings. Consumer’s tendency to switch to various streaming services is hurting company’s top line. It also has a large debt burden, which dents its competitiveness and limits growth potential. In addition, a challenging macroeconomic environment, inflationary pressures and business uncertainty are forcing consumers to have a conservative approach to higher-tier services.
The Zacks Consensus Estimate for total revenues is pegged at $31,459 million, indicating a marginal increase from $31,343 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 55 cents per share. It had reported earnings of 61 cents per share in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for AT&T for the fourth 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 exactly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.30%, with the former pegged at 56 cents and the latter at 55 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-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:
Qualcomm Incorporated (QCOM - Free Report) is set to release quarterly numbers on Jan 31. It has an Earnings ESP of +3.45% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Silicon Motion Technology Corporation (SIMO - Free Report) is +4.92% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 6.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +4.58% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 1.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.