Despite Beating Q4 Estimates AT&T Plunges 8.4%

Global telecommunications and media giant AT&T, Inc. (T) reported better-than-expected fourth-quarter results. However, despite beating analyst expectations on both the earnings and revenue fronts, shares fell 8.4% to close at $24.25 on January 26.

Better-than-Expected Results

AT&T’s Q4 adjusted earnings came in at $0.78 per share, up 4% year-over-year, and 2 cents better than analysts’ estimates of $0.76 per share.

Moreover, quarterly revenue stood at $40.96 billion, down 10.4% year-over-year, yet it exceeded Street estimates of $40.68 billion. The fall in consolidated revenue was mainly driven by business divestitures of U.S. video in Q3 and Vrio in Q4, coupled with lower Business Wireline revenue.

During the quarter, AT&T Mobility Solutions added 884,000 net postpaid phones and 1.3 million postpaid net adds. Similarly, the Consumer Wireline business added 271,000 fiber net adds.

In the Warner Media segment, at the quarter-end, the company had a total of 73.8 million global HBO Max and HBO subscribers and 46.8 million domestic subscribers. The company expects the sale of Warner Media to close in the second quarter.

For the full year fiscal 2021, the company reported adjusted earnings of $3.40 per share, a 6.9% annual growth, while revenue fell 1.7% to $168.86 billion compared to FY20.

On an annual basis, AT&T Mobility Solutions added 3.2 million postpaid phone net adds and 4.5 million postpaid net adds. Meanwhile, Consumer Wireline business added 1 million fiber net adds.

Company Comments

AT&T CEO, John Stankey, said, “We ended 2021 the way we started it – by growing our customer relationships, running our operations more effectively and efficiently, and sharpening our focus. Our momentum is strong and we’re confident there is more opportunity to continue to grow our customer base and drive costs from the business.”

“We’re at the dawn of a new age of connectivity. Our focus now is to be America’s best connectivity provider and also ensure our media assets are positioned to grow and truly become a global media distribution leader,” Stankey added.

Full Year 2022 Outlook

For the full year fiscal 2022, the company expects to grow in the low-single digits range annually and adjusted earnings are forecasted between $3.10 and $3.15 per share. Out of the total, Warner Media and Xandr are expected to contribute revenue between $37 billion and $39 billion.

Analysts’ Take

Ahead of AT&T’s earnings call, Bank of America analyst David Barden reiterated a Buy rating on the stock with a price target of $36, which implies 48.4% upside potential to current levels.

Barden expected AT&T to discuss in detail its expectations of free cash flows, capital spending plans, especially those focused on its fiber build. Moreover, the analyst also expects more clarity on the company’s cost reduction initiatives and deleveraging targets for 2022.

Overall, the stock has a Moderate Buy consensus rating based on 6 Buys, 4 Holds, and 1 Sell. The average AT&T price target of $29.73 implies 22.6% upside potential to current levels. Shares have lost 9.3% over the past year.

Insider Trading

TipRanks’ Insider Trading Activity shows that Insider Signal is currently Positive on AT&T, which is one of the best 5g stocks. In the last quarter, corporate insiders have bought $2.5 million worth of shares.

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