What the Verizon Earnings Report Means for AT&T Earnings

AT&T Inc. (NYSE: T) is set to report its third-quarter earnings Wednesday after the market closes. This follows Verizon Communications Inc.’s (NYSE: VZ) earnings report, which disappointed as it lost on both the top and bottom lines compared to consensus estimates. AT&T and Verizon took a small dip in trading Tuesday morning reflecting this, but both gained handily afterward.

Thomson Reuters has consensus estimates for AT&T of $0.64 in earnings per share and $33.26 billion in revenue. In the third quarter of the previous year, it recorded earnings of $0.66 per share on $32.16 billion in revenue. Looking ahead to the fourth quarter, consensus estimates call for $0.61 in earnings per share and revenue of $34.68 billion.

Merrill Lynch maintained a Neutral rating and $35 price target. According to the metrics that AT&T gave, the Next plan take rate should be around 50%, just above the Merrill Lynch estimate of 48%. The “bring your own device” plan looks to add 400,000, and at the same time this could put pressure on equipment revenues, but it would overall benefit the company’s margins. Merrill Lynch forecasts 4.1 million in Next device sales in the third quarter.

Credit Suisse maintained an Outperform rating with a $41 price target. The firm believes that the purpose of the AT&T investor and analyst day was to highlight the Digital Life connected-home plan and the Drive program. AT&T also outlined the complexity of developing these markets.

Verizon mentioned in its earnings report that it had 1.5 million new customer additions, which were predominantly brought in through new smartphones and tablets. During the third-quarter, Verizon added 457,000 postpaid phones and 1.1 million postpaid tablets.

Shares are testing the 50-day moving average at its current level $34.29, but it may act as weak resistance as over the third quarter share prices have shown little regard for the 50-day moving average. For most of the past six months, AT&T has traded within a range of roughly $33.25 to $35.25. The 200-day moving average briefly acted as support as shares bounced off it in mid-October.

Shares of AT&T were trading up almost 0.8% at $34.55. They have a consensus analyst price target of $36.00 and a 52-week trading range of $31.74 to $37.48. The company has a market cap of $179 billion.

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