It has been about a month since the last earnings report for AT&T (T Quick QuoteT - Free Report) . Shares have added about 3.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AT&T due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AT&T Beats on Q3 Earnings, Revenues Miss Despite Wireless Traction

AT&T reported relatively healthy third-quarter 2024 results with adjusted earnings beating the Zacks Consensus Estimate but the top line missing the same.

The company witnessed solid wireless traction and customer additions, which were partially offset by lower demand for legacy voice and data services. AT&T 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 a loss of $226 million or a loss of 3 cents per share against net income of $3.4 billion or 48 cents per share in the year-ago quarter. The decline was primarily attributable to a $4.4 billion non-cash goodwill impairment charge during the quarter.

Excluding non-recurring items, adjusted earnings from continuing operations were 60 cents per share compared with 64 cents in the year-ago quarter. Adjusted earnings for the third quarter beat the Zacks Consensus Estimate by a penny.

Quarter Details

Quarterly GAAP operating revenues decreased marginally by 0.5% year over year to $30.21 billion, largely due to declining Mobility equipment sales and lower Business Wireline revenues, partially offset by higher Mobility Service and Consumer Wireline revenues. The top line fell short of the consensus mark of $30.55 billion.

Adjusted operating income remained flat at $6.5 billion for respective adjusted operating income margins of 21.6% and 21.5%. Adjusted EBITDA improved to $11.6 billion from $11.2 billion.

AT&T witnessed solid subscriber momentum with 429,000 post-paid net additions. This included 403,000 postpaid wireless phone additions. Postpaid churn was 0.78%, while postpaid phone-only average revenue per user (ARPU) increased 1.9% year over year to $57.07 due to improved international roaming, pricing actions and a transition to higher-priced unlimited plans.

Segmental Performance

Communications: Total segment operating revenues were $29.07 billion, down from $29.24 billion, as improvement in the Mobility business (up 1.7% to $21.05 billion) and Consumer Wireline (up 2.6% to $3.42 billion) was more than offset by a decline in Business Wireline (down 11.8% to $4.61 billion). The segment revenues missed our estimates of $29.24 billion.

Service revenues from the Mobility unit improved 4% to $16.54 billion, driven by solid subscriber and postpaid ARPU gains, while equipment revenues decreased 5.7% year over year to $4.51 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 226,000, while Internet Air added 135,000 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 1.6% to $7.2 billion, with operating margins of 24.6% (down 30 bps). Adjusted EBITDA was $11.97 billion compared with $11.62 billion in the year-ago quarter.

Latin America: Total operating revenues were $1.02 billion, up 3% year over year, due to growth in equipment revenues and higher sales. Adjusted EBITDA improved to $168 million from $155 million in the year-ago quarter for respective margins of 16.4% and 15.6%.

Cash Flow & Liquidity

For the first nine months of 2024, AT&T generated $26.87 billion of cash from operations compared with $26.94 billion in the prior-year period. Free cash flow for the quarter was $5.09 billion compared with $5.18 billion in the year-ago quarter. As of Sept. 30, 2024, AT&T had $2.59 billion of cash and cash equivalents with long-term debt of $126.37 billion. Net debt to adjusted EBITDA was about 2.82X.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -5.05% due to these changes.

VGM Scores

Currently, AT&T has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AT&T has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

AT&T is part of the Zacks Wireless National industry. Over the past month, Verizon Communications (VZ Quick QuoteVZ - Free Report) , a stock from the same industry, has gained 1.5%. The company reported its results for the quarter ended September 2024 more than a month ago.

Verizon reported revenues of $33.33 billion in the last reported quarter, representing a year-over-year change of 0%. EPS of $1.19 for the same period compares with $1.22 a year ago.

Verizon is expected to post earnings of $1.11 per share for the current quarter, representing a year-over-year change of +2.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.5%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Verizon. Also, the stock has a VGM Score of B.