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AT&T (T) Beats Q1 Earnings Estimates, Falters on Revenues
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AT&T Inc. (T - Free Report) reported solid first-quarter 2023 results as healthy wireless traction and customer additions was partially offset by lower demand for legacy voice and data services. The company recorded solid 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, while maintaining a healthy dividend payment and actively pruning debt.
Net Income
On a GAAP basis, AT&T reported net income of $4,176 million or 57 cents per share compared with $4,762 million or 65 cents per share in the year-ago quarter. The significant year-over-year decline, despite top-line growth, was primarily attributable to lower other income.
Excluding non-recurring items, adjusted earnings were 60 cents per share compared with 63 cents in the year-earlier quarter. Adjusted earnings for the first quarter beat the Zacks Consensus Estimate by a couple of cents.
Quarterly GAAP operating revenues increased 1.4% year over year to $30,139 million, largely due to higher Mobility, Mexico and Consumer Wireline revenues, partially offset by lower revenues from Business Wireline services. The top line missed the consensus mark of $30,344 million.
Adjusted operating income for the quarter was $5,975 million compared with $5,755 million in the prior-year quarter. This resulted in respective adjusted operating income margins of 19.8% and 19.4%. Adjusted EBITDA improved to $10,589 million from $10,190 million.
AT&T witnessed solid subscriber momentum with 524,000 post-paid net additions. This included 424,000 postpaid wireless phone additions. Postpaid churn was 0.99% compared with 0.94% in the year-ago quarter. Postpaid phone-only average revenue per user (ARPU) increased 2% year over year to $55.05 due to improved international roaming and shift to higher-priced unlimited plans. AT&T is currently covering 160 million people with mid-band 5G spectrum, while its nationwide 5G is reaching out to 290 million people.
Segmental Performance
Communications: Total segment operating revenues were up to $29,152 million from $28,876 million as decline in Business Wireline (down 5.5% to $5,331 million) was offset by a gain in the Mobility business (up 2.5% to $20,582 million) and Consumer Wireline (up 2.5% to $3,239 million). Service revenues from the Mobility unit improved 5.2% to $15,483 million driven by solid subscriber gains, while equipment revenues declined 4.7% year over year to $5,099 million driven by lower volumes owing to challenging macroeconomic environment. Revenues from Consumer Wireline business were up due to gain in fiber broadband. AT&T recorded net fiber additions of 272,000 and has the ability to serve 19.7 million consumer and more than 3 million business customer locations in more than 100 U.S. metro areas with fiber. Revenues from Business Wireline were down due to decline in legacy products as customers shifted to more advanced IP-based offerings.
Segment operating income was $6,743 million compared with $6,487 million in the year-ago quarter for respective operating margin of 23.1% and 22.5%. Adjusted EBITDA was $11,032 million compared with $10,611 million in the year-ago quarter.
Latin America: Total operating revenues were $883 million, up 28% year over year, due to growth in service and equipment revenues driven by favorable currency impact and higher sales. Adjusted EBITDA improved to $145 million from $59 million in the year-ago quarter for respective margins of 16.4% and 8.6%.
Cash Flow & Liquidity
AT&T generated $6,678 million of cash from operations in the quarter compared with $7,630 million in the prior-year period. Free cash flow at quarter end was $1,004 million compared with $2,811 million in the year-ago period. As of Mar 31, 2023, AT&T had $2,821 million of cash and cash equivalents with long-term debt of $123,727 million. Net debt to adjusted EBITDA was about 3.22x.
Moving Forward
While optimizing operations, AT&T is aiming to increase efficiencies to lower operating costs, while focusing on 5G and fiber-based connectivity along with expanded reach of software-based entertainment platforms. Free cash flow in 2023 is expected to be in the vicinity of $16 billion due to cost savings. The company is also aiming to reduce its debt burden by monetizing non-core assets.
Here are some better-ranked stocks from the broader industry.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 14.2% and delivered an earnings surprise of 14.2%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Juniper Networks, Inc. (JNPR - Free Report) carries a Zacks Rank #2. It has a long-term earnings growth expectation of 7% and delivered an earnings surprise of 1.6%, on average, in the trailing four quarters.
Juniper is leveraging the 400-gig cycle to capture hyperscale switching opportunities inside the data center. The company is set to capitalize on the increasing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence.
Splunk Inc. , sporting a Zacks Rank #1, is another key pick. San Francisco, CA-based Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and helps in operational decision making.
Splunk’s software offerings enable users to have deep insight of their data on a real-time basis, thereby making the operational decision-making process faster. It delivered a trailing four-quarter earnings surprise of 131.1%, on average. Splunk has a long-term earnings growth expectation of 24.1%.
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AT&T (T) Beats Q1 Earnings Estimates, Falters on Revenues
AT&T Inc. (T - Free Report) reported solid first-quarter 2023 results as healthy wireless traction and customer additions was partially offset by lower demand for legacy voice and data services. The company recorded solid 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, while maintaining a healthy dividend payment and actively pruning debt.
Net Income
On a GAAP basis, AT&T reported net income of $4,176 million or 57 cents per share compared with $4,762 million or 65 cents per share in the year-ago quarter. The significant year-over-year decline, despite top-line growth, was primarily attributable to lower other income.
Excluding non-recurring items, adjusted earnings were 60 cents per share compared with 63 cents in the year-earlier quarter. Adjusted earnings for the first quarter beat the Zacks Consensus Estimate by a couple of cents.
AT&T Inc. Price, Consensus and EPS Surprise
AT&T Inc. price-consensus-eps-surprise-chart | AT&T Inc. Quote
Quarter Details
Quarterly GAAP operating revenues increased 1.4% year over year to $30,139 million, largely due to higher Mobility, Mexico and Consumer Wireline revenues, partially offset by lower revenues from Business Wireline services. The top line missed the consensus mark of $30,344 million.
Adjusted operating income for the quarter was $5,975 million compared with $5,755 million in the prior-year quarter. This resulted in respective adjusted operating income margins of 19.8% and 19.4%. Adjusted EBITDA improved to $10,589 million from $10,190 million.
AT&T witnessed solid subscriber momentum with 524,000 post-paid net additions. This included 424,000 postpaid wireless phone additions. Postpaid churn was 0.99% compared with 0.94% in the year-ago quarter. Postpaid phone-only average revenue per user (ARPU) increased 2% year over year to $55.05 due to improved international roaming and shift to higher-priced unlimited plans. AT&T is currently covering 160 million people with mid-band 5G spectrum, while its nationwide 5G is reaching out to 290 million people.
Segmental Performance
Communications: Total segment operating revenues were up to $29,152 million from $28,876 million as decline in Business Wireline (down 5.5% to $5,331 million) was offset by a gain in the Mobility business (up 2.5% to $20,582 million) and Consumer Wireline (up 2.5% to $3,239 million). Service revenues from the Mobility unit improved 5.2% to $15,483 million driven by solid subscriber gains, while equipment revenues declined 4.7% year over year to $5,099 million driven by lower volumes owing to challenging macroeconomic environment. Revenues from Consumer Wireline business were up due to gain in fiber broadband. AT&T recorded net fiber additions of 272,000 and has the ability to serve 19.7 million consumer and more than 3 million business customer locations in more than 100 U.S. metro areas with fiber. Revenues from Business Wireline were down due to decline in legacy products as customers shifted to more advanced IP-based offerings.
Segment operating income was $6,743 million compared with $6,487 million in the year-ago quarter for respective operating margin of 23.1% and 22.5%. Adjusted EBITDA was $11,032 million compared with $10,611 million in the year-ago quarter.
Latin America: Total operating revenues were $883 million, up 28% year over year, due to growth in service and equipment revenues driven by favorable currency impact and higher sales. Adjusted EBITDA improved to $145 million from $59 million in the year-ago quarter for respective margins of 16.4% and 8.6%.
Cash Flow & Liquidity
AT&T generated $6,678 million of cash from operations in the quarter compared with $7,630 million in the prior-year period. Free cash flow at quarter end was $1,004 million compared with $2,811 million in the year-ago period. As of Mar 31, 2023, AT&T had $2,821 million of cash and cash equivalents with long-term debt of $123,727 million. Net debt to adjusted EBITDA was about 3.22x.
Moving Forward
While optimizing operations, AT&T is aiming to increase efficiencies to lower operating costs, while focusing on 5G and fiber-based connectivity along with expanded reach of software-based entertainment platforms. Free cash flow in 2023 is expected to be in the vicinity of $16 billion due to cost savings. The company is also aiming to reduce its debt burden by monetizing non-core assets.
Zacks Rank & Stock to Consider
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.
Here are some better-ranked stocks from the broader industry.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 14.2% and delivered an earnings surprise of 14.2%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Juniper Networks, Inc. (JNPR - Free Report) carries a Zacks Rank #2. It has a long-term earnings growth expectation of 7% and delivered an earnings surprise of 1.6%, on average, in the trailing four quarters.
Juniper is leveraging the 400-gig cycle to capture hyperscale switching opportunities inside the data center. The company is set to capitalize on the increasing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence.
Splunk Inc. , sporting a Zacks Rank #1, is another key pick. San Francisco, CA-based Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and helps in operational decision making.
Splunk’s software offerings enable users to have deep insight of their data on a real-time basis, thereby making the operational decision-making process faster. It delivered a trailing four-quarter earnings surprise of 131.1%, on average. Splunk has a long-term earnings growth expectation of 24.1%.