AT&T Inc. (T Quick QuoteT - Free Report) reported modest second-quarter 2024 results, as solid wireless traction and customer additions were partially offset by lower demand for legacy voice and data services. The company recorded strong 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.

Net Income

On a GAAP basis, AT&T reported net income of $3.5 billion or 49 cents per share compared with $4.4 billion or 61 cents per share in the year-ago quarter. The decline was primarily attributable to lower net sales and higher operating expenses year over year.

Excluding non-recurring items, adjusted earnings from continuing operations were 57 cents per share compared with 63 cents in the year-ago quarter. Adjusted earnings for the second quarter missed the Zacks Consensus Estimate by a penny.

Quarter Details

Quarterly GAAP operating revenues decreased marginally by 0.4% year over year to $29.8 billion, largely due to declining Mobility equipment sales and lower Business Wireline revenues, partially offset by higher Mobility Service, Mexico and Consumer Wireline revenues. The top line fell short of the consensus mark of $30.15 billion.

Adjusted operating income for the quarter was $6.3 billion compared with $6.4 billion in the prior-year quarter. This resulted in respective adjusted operating income margins of 21.1% and 21.4%. Adjusted EBITDA improved to $11.3 billion from $11.1 billion.

AT&T witnessed solid subscriber momentum with 593,000 post-paid net additions. This included 419,000 postpaid wireless phone additions. Postpaid churn was 0.85%, while postpaid phone-only average revenue per user (ARPU) increased 1.4% year over year to $56.42 due to improved international roaming, pricing actions and a transition to higher-priced unlimited plans.

Segmental Performance

Communications: Total segment operating revenues were $28.58 billion, down from $28.84 billion, as improvement in the Mobility business (up 0.8% to $20.48 billion) and Consumer Wireline (up 3% to $3.35 billion) was more than offset by a decline in Business Wireline (down 9.9% to $4.76 billion). The segment revenues missed our estimates of $29.08 billion.

Service revenues from the Mobility unit improved 3.4% to $16.28 billion, driven by solid subscriber and postpaid ARPU gains, while equipment revenues decreased 8% year over year to $4.2 billion due to lower sales volume. Revenues from the Consumer Wireline business were up due to a gain in fiber broadband. AT&T recorded net fiber additions of 239,000, while Internet Air added 139,000 subscribers during the quarter.

Revenues from Business Wireline were down due to lower demand for legacy voice and data services as customers shifted to more advanced IP-based offerings. Total segment operating income declined 2.4% to $7 billion, with operating margins of 24.5% (down 40 bps). Adjusted EBITDA was $11.78 billion compared with $11.49 billion in the year-ago quarter.

Latin America: Total operating revenues were $1.1 billion, up 14.1% year over year, due to growth in service and equipment revenues driven by favorable currency impact and higher sales. Adjusted EBITDA improved to $178 million from $146 million in the year-ago quarter for respective margins of 16.1% and 15.1%.

Cash Flow & Liquidity

For the first six months of 2024, AT&T generated $16.64 billion of cash from operations compared with $16.6 billion in the prior-year period. Free cash flow for the quarter was $4.57 billion compared with $4.21 billion in the year-ago quarter. As of Jun 30, 2024, AT&T had $3.09 billion of cash and cash equivalents with long-term debt of $125.36 billion. Net debt to adjusted EBITDA was about 2.87X.

Guidance

While optimizing operations, AT&T is aiming to increase efficiencies to lower operating costs while focusing on 5G and fiber-based connectivity, along with an expanded reach of software-based entertainment platforms. For fiscal 2024, AT&T has reiterated its previous guidance. Wireless service revenues are likely to improve in the vicinity of 3%, while broadband revenues are anticipated to be up in excess of 7%.

Adjusted earnings are projected to be within $2.15 and $2.25 per share. Free cash flow in 2024 is expected to be within $17-$18 billion due to cost savings. The company is also aiming to reduce its debt burden by monetizing non-core assets. AT&T firmly remains on track to pass more than 30 million fiber locations by the end of 2025.

Zacks Rank

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.

Upcoming Releases

Cogent Communications Holdings, Inc. (CCOI Quick QuoteCCOI - Free Report) is scheduled to release second-quarter 2024 earnings on Aug 8. The Zacks Consensus Estimate for earnings is pegged at a loss of $1.02 per share, suggesting a decline of 684.6% from the year-ago reported figure.

Akamai Technologies, Inc. (AKAM Quick QuoteAKAM - Free Report) is slated to release second-quarter 2024 earnings on Aug 8. The Zacks Consensus Estimate for earnings is pegged at $1.54 per share, indicating growth of 3.4% from the year-ago reported figure.

Akamai has a long-term earnings growth expectation of 4.8%. AKAM delivered an average earnings surprise of 5.4% in the last four reported quarters.

Motorola Solutions, Inc. (MSI Quick QuoteMSI - Free Report) is set to release second-quarter 2024 earnings on Aug 1. The Zacks Consensus Estimate for earnings is pegged at $3.00 per share, implying a growth of 13.2% from the year-ago reported figure.

Motorola has a long-term earnings growth expectation of 9.5%. MSI delivered an average earnings surprise of 7.5% in the last four reported quarters.