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AT&T Inc. (T - Free Report) reported relatively healthy second-quarter 2023 results as solid 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 $4,437 million or 61 cents per share compared with $4,105 million or 57 cents per share in the year-ago quarter. The significant year-over-year rise was primarily attributable to top-line growth and lower operating expenses.
Excluding non-recurring items, adjusted earnings were 63 cents per share compared with 65 cents in the year-earlier quarter. Adjusted earnings for the second quarter beat the Zacks Consensus Estimate by 3 cents.
Quarterly GAAP operating revenues increased 0.9% year over year to $29,917 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 $30,087 million.
Adjusted operating income for the quarter was $6,395 million compared with $5,897 million in the prior-year quarter. This resulted in respective adjusted operating income margins of 21.4% and 16.7%. Adjusted EBITDA improved to $11,053 million from $10,330 million.
AT&T witnessed solid subscriber momentum with 464,000 post-paid net additions. This included 326,000 postpaid wireless phone additions. Postpaid churn was 0.95% compared with 0.93% in the year-ago quarter. Postpaid phone-only average revenue per user (ARPU) increased 1.5% year over year to $55.63 due to improved international roaming and shift to higher-priced unlimited plans. AT&T is currently covering 175 million people with mid-band 5G spectrum, while its nationwide 5G is reaching out to more than 290 million people.
Segmental Performance
Communications: Total segment operating revenues were up to $28,845 million from $28,695 million as decline in Business Wireline (down 5.6% to $5,279 million) was offset by a gain in the Mobility business (up 2% to $20,315 million) and Consumer Wireline (up 2.4% to $3,251 million). However, the segment revenues fell short of our estimates of $29,160.8 million.
Service revenues from the Mobility unit improved 4.9% to $15,745 million driven by solid subscriber gains, while equipment revenues declined 7.2% year over year to $4,570 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 251,000 and has the ability to serve 20.2 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 $7,177 million compared with $6,683 million in the year-ago quarter for respective operating margin of 24.9% and 23.3%. Adjusted EBITDA was $11,490 million compared with $10,798 million in the year-ago quarter.
Latin America: Total operating revenues were $967 million, up 19.7% year over year, due to growth in service and equipment revenues driven by favorable currency impact and higher sales. Adjusted EBITDA improved to $146 million from $87 million in the year-ago quarter for respective margins of 15.1% and 10.8%.
Cash Flow & Liquidity
AT&T generated $16,600 million of cash from operations in the first six months of 2023 compared with $15,370 million in the prior-year period. Free cash flow at quarter end was $4,209 million compared with $1,384 million in the year-ago period, bringing the respective tallies for the first half of 2023 and 2022 to $5,213 and $4,195. As of Jun 30, 2023, AT&T had $9,528 million of cash and cash equivalents with long-term debt of $128,012 million. Net debt to adjusted EBITDA was about 3.1x.
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. AT&T firmly remains on track to reach 200 million people with mid-band 5G by the end of 2023 and pass more than 30 million fiber locations by the end of 2025.
Here are some better-ranked stocks from the broader industry.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. It has a long-term earnings growth expectation of 13.9%.
It is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 4.9%, on average, in the trailing four quarters. It has a long-term earnings growth expectation of 10%.
Akamai is a global provider of content delivery network and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Akamai’s offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Viasat Inc. (VSAT - Free Report) , sporting a Zacks Rank #1, enjoys a leading position in the satellite and wireless communications market. Headquartered in Carlsbad, CA, it designs, develops and markets advanced digital satellite telecommunications and other wireless networking and signal processing equipment. The company serves its high-bandwidth, high-performance communications solutions to the public as well as military, enterprises and government enterprises.
Viasat is ramping up investments in the development of its revolutionary ViaSat-3 broadband communications platform, which will have nearly 10 times the bandwidth capacity of ViaSat-2. These satellites will be capable of covering one-third of the world, including all Americas.
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AT&T (T) Q2 Earnings Beat Estimates, Revenues Improve Y/Y
AT&T Inc. (T - Free Report) reported relatively healthy second-quarter 2023 results as solid 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 $4,437 million or 61 cents per share compared with $4,105 million or 57 cents per share in the year-ago quarter. The significant year-over-year rise was primarily attributable to top-line growth and lower operating expenses.
Excluding non-recurring items, adjusted earnings were 63 cents per share compared with 65 cents in the year-earlier quarter. Adjusted earnings for the second quarter beat the Zacks Consensus Estimate by 3 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 0.9% year over year to $29,917 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 $30,087 million.
Adjusted operating income for the quarter was $6,395 million compared with $5,897 million in the prior-year quarter. This resulted in respective adjusted operating income margins of 21.4% and 16.7%. Adjusted EBITDA improved to $11,053 million from $10,330 million.
AT&T witnessed solid subscriber momentum with 464,000 post-paid net additions. This included 326,000 postpaid wireless phone additions. Postpaid churn was 0.95% compared with 0.93% in the year-ago quarter. Postpaid phone-only average revenue per user (ARPU) increased 1.5% year over year to $55.63 due to improved international roaming and shift to higher-priced unlimited plans. AT&T is currently covering 175 million people with mid-band 5G spectrum, while its nationwide 5G is reaching out to more than 290 million people.
Segmental Performance
Communications: Total segment operating revenues were up to $28,845 million from $28,695 million as decline in Business Wireline (down 5.6% to $5,279 million) was offset by a gain in the Mobility business (up 2% to $20,315 million) and Consumer Wireline (up 2.4% to $3,251 million). However, the segment revenues fell short of our estimates of $29,160.8 million.
Service revenues from the Mobility unit improved 4.9% to $15,745 million driven by solid subscriber gains, while equipment revenues declined 7.2% year over year to $4,570 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 251,000 and has the ability to serve 20.2 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 $7,177 million compared with $6,683 million in the year-ago quarter for respective operating margin of 24.9% and 23.3%. Adjusted EBITDA was $11,490 million compared with $10,798 million in the year-ago quarter.
Latin America: Total operating revenues were $967 million, up 19.7% year over year, due to growth in service and equipment revenues driven by favorable currency impact and higher sales. Adjusted EBITDA improved to $146 million from $87 million in the year-ago quarter for respective margins of 15.1% and 10.8%.
Cash Flow & Liquidity
AT&T generated $16,600 million of cash from operations in the first six months of 2023 compared with $15,370 million in the prior-year period. Free cash flow at quarter end was $4,209 million compared with $1,384 million in the year-ago period, bringing the respective tallies for the first half of 2023 and 2022 to $5,213 and $4,195. As of Jun 30, 2023, AT&T had $9,528 million of cash and cash equivalents with long-term debt of $128,012 million. Net debt to adjusted EBITDA was about 3.1x.
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. AT&T firmly remains on track to reach 200 million people with mid-band 5G by the end of 2023 and pass more than 30 million fiber locations by the end of 2025.
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.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. It has a long-term earnings growth expectation of 13.9%.
It is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 4.9%, on average, in the trailing four quarters. It has a long-term earnings growth expectation of 10%.
Akamai is a global provider of content delivery network and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Akamai’s offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Viasat Inc. (VSAT - Free Report) , sporting a Zacks Rank #1, enjoys a leading position in the satellite and wireless communications market. Headquartered in Carlsbad, CA, it designs, develops and markets advanced digital satellite telecommunications and other wireless networking and signal processing equipment. The company serves its high-bandwidth, high-performance communications solutions to the public as well as military, enterprises and government enterprises.
Viasat is ramping up investments in the development of its revolutionary ViaSat-3 broadband communications platform, which will have nearly 10 times the bandwidth capacity of ViaSat-2. These satellites will be capable of covering one-third of the world, including all Americas.