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Will Top-Line Contraction Hurt AT&T's (T) Earnings in Q1?
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AT&T Inc. (T - Free Report) is scheduled to report first-quarter 2023 results on Apr 20, before the opening bell. In the last reported quarter, the adjusted earnings beat the Zacks Consensus Estimate by 2 cents. Despite an increasing customer base, the company is expected to witness a top-line contraction year over year due to intense competition in the wireless market and higher investments for 5G expansion and fiber broadband infrastructure development.
Factors at Play
During the first quarter, AT&T continued to expand its 5G network coverage in rural and urban areas nationwide. It is heavily investing for enhancing network capacity and improving the resiliency of the existing infrastructure. The company reported that its coverage area reached more than 2.91 million square miles. Its 5G network covers 290 million people in nearly 24,000 cities across the United States. This is likely to have been reflected in the first quarter results.
AT&T is expanding its fiber network to ensure reliable, high-speed broadband for customers. The company reported that AT&T fiber is installed in 24 million locations, including 4 million business locations. It plans to ramp up investment in fiber network expansion to provide services in 30 million locations by the end of 2025.
In the first quarter, AT&T — in collaboration with AST SpaceMobile — took the initiative to develop a space-based cellular broadband network to provide reliable and fast broadband connectivity in remote and difficult-to-reach locations.
ServiceNow utilized AT&T’s design and technical expertise to develop an enhanced Telecom Network Inventory solution. The solution will provide communication service providers with key insights about their network operations and help them make better decisions about network investments, manage orders and improve customer service. AT&T intends to deploy this solution in its operations to enhance operational efficiency. Such initiatives are likely to get reflected in the upcoming results.
In the to-be-reported quarter, Nokia and AT&T collaborated to accomplish a successful trial of an Open RAN compliant near real-time RAN Intelligent Controller (RIC) with a native E2 interface. AT&T provided network support during the trial to facilitate the testing and validation of the near real-time RIC platform running on Nokia AirScale base stations.
In the March quarter, AT&T partnered with Northrop Grumman Corporation and Fujitsu to design new 5G-powered open architecture capabilities to support joint force. To transmit intelligence, surveillance and reconnaissance (ISR) data and video, radios were used in conjunction with AT&T's private 5G network, Northrop Grumman's tactical data links and Fujitsu's Open Radio Access Network (O-RAN) at the demonstration. These initiatives are likely to have a favorable effect on the company’s first-quarter performance.
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 of switching to various streaming services from TV subscriptions is hurting company’s top line. It also has a large debt burden, which dented its competitiveness and is limiting growth potential.
In addition, a challenging macroeconomic environment, inflationary pressures and business uncertainty are forcing consumers to have a conservative approach for higher-tier services. This is likely to have led to top-line contraction.
The Zacks Consensus Estimate for total revenues is pegged at $30,344 million, indicating a decline from $38,105 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 58 cents per share. It had reported earnings of 77 cents per share in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for AT&T in the first 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 +0.87%. 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 T-Mobile US, Inc. (TMUS - Free Report) is +5.54% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Apr 27.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +8.00% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Apr 26.
Image: Bigstock
Will Top-Line Contraction Hurt AT&T's (T) Earnings in Q1?
AT&T Inc. (T - Free Report) is scheduled to report first-quarter 2023 results on Apr 20, before the opening bell. In the last reported quarter, the adjusted earnings beat the Zacks Consensus Estimate by 2 cents. Despite an increasing customer base, the company is expected to witness a top-line contraction year over year due to intense competition in the wireless market and higher investments for 5G expansion and fiber broadband infrastructure development.
Factors at Play
During the first quarter, AT&T continued to expand its 5G network coverage in rural and urban areas nationwide. It is heavily investing for enhancing network capacity and improving the resiliency of the existing infrastructure. The company reported that its coverage area reached more than 2.91 million square miles. Its 5G network covers 290 million people in nearly 24,000 cities across the United States. This is likely to have been reflected in the first quarter results.
AT&T is expanding its fiber network to ensure reliable, high-speed broadband for customers. The company reported that AT&T fiber is installed in 24 million locations, including 4 million business locations. It plans to ramp up investment in fiber network expansion to provide services in 30 million locations by the end of 2025.
In the first quarter, AT&T — in collaboration with AST SpaceMobile — took the initiative to develop a space-based cellular broadband network to provide reliable and fast broadband connectivity in remote and difficult-to-reach locations.
ServiceNow utilized AT&T’s design and technical expertise to develop an enhanced Telecom Network Inventory solution. The solution will provide communication service providers with key insights about their network operations and help them make better decisions about network investments, manage orders and improve customer service. AT&T intends to deploy this solution in its operations to enhance operational efficiency. Such initiatives are likely to get reflected in the upcoming results.
In the to-be-reported quarter, Nokia and AT&T collaborated to accomplish a successful trial of an Open RAN compliant near real-time RAN Intelligent Controller (RIC) with a native E2 interface. AT&T provided network support during the trial to facilitate the testing and validation of the near real-time RIC platform running on Nokia AirScale base stations.
In the March quarter, AT&T partnered with Northrop Grumman Corporation and Fujitsu to design new 5G-powered open architecture capabilities to support joint force. To transmit intelligence, surveillance and reconnaissance (ISR) data and video, radios were used in conjunction with AT&T's private 5G network, Northrop Grumman's tactical data links and Fujitsu's Open Radio Access Network (O-RAN) at the demonstration. These initiatives are likely to have a favorable effect on the company’s first-quarter performance.
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 of switching to various streaming services from TV subscriptions is hurting company’s top line. It also has a large debt burden, which dented its competitiveness and is limiting growth potential.
In addition, a challenging macroeconomic environment, inflationary pressures and business uncertainty are forcing consumers to have a conservative approach for higher-tier services. This is likely to have led to top-line contraction.
The Zacks Consensus Estimate for total revenues is pegged at $30,344 million, indicating a decline from $38,105 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 58 cents per share. It had reported earnings of 77 cents per share in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for AT&T in the first 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 +0.87%. 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:
Motorola Solutions, Inc. (MSI - Free Report) is set to release quarterly numbers on May 11. It has an Earnings ESP of +1.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +5.54% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Apr 27.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +8.00% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Apr 26.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.