Earnings Challenged by Guidance From AT&T

The company gave guidance for full-year consolidated revenue growth in the range of 3% to 4%, which also includes the impact of fewer than expected AT&T Next gross adds and upgrades and greater than expected number of BYOD (bring your own device) gross adds. Thomson Reuters has consensus estimates for the full year of $2.59 in earnings per share and $133.08 billion in revenue. This is deemed a tad lower as far as guidance is concerned.

Net income for the third quarter was $3.0 billion, compared to $3.8 billion in the third quarter from the previous year. Total revenues for the Wireless segment were up 4.9% year-over-year to $18.3 billion and total revenues for the Wireline segment were up 0.4% to $14.6 billion.

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AT&T added more than 2 million new Wireless and Wireline connections. Postpaid net adds were 785,000, over double the third quarter of the previous year. There have been more than 2.4 million postpaid net adds for AT&T year to date.

Randall Stephenson, AT&T chairman and CEO, said:

Our strategy is on track and our investments in giving customers best-in-class service to access content everywhere and on any screen continue to pay off. We had strong subscriber growth in wireless and U-verse, and our strategic business services revenues continued to post double-digit growth.

Merrill Lynch recently 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 recently 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.

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Shares of AT&T closed Wednesday down 0.35% at $34.50. Following the earnings report, the initial reaction in the after-hours has been negative and shares were down over 2% at $33.70 shortly after the closing bell. The company’s stock has a consensus analyst price target of $36.00 and a 52-week trading range of $31.74 to $37.48. It has a market cap of $179 billion.