Why Earnings Were Good Enough at AT&T

Be advised that other consensus sites were calling for $0.54 in earnings per share.

The telecom giant gave its guidance for 2015 in a few broad strokes. It expects continued consolidated revenue growth and adjusted EPS growth should be in the low-single digit range. Margins are expected to expand across AT&T’s segments. Free cash flow and dividend coverage are expected to improve as well. Thomson Reuters has consensus estimates for the 2015 full year as $2.55 in earnings per share on $134.89 billion in revenues.

In the fourth quarter, cash from operating activities totaled $5.7 billion and capex totaled $4.4 billion, while free cash flow was $1.3 billion.

AT&T’s Wireless segment reported operating revenues of $19.9 billion, up 7.7% from the fourth quarter of the previous year. The Wireline segment had revenues of $14.6 billion which was down 1.0% year-over-year.

Apart from the revenues, in the fourth quarter, AT&T had 405,000 U-verse high speed Internet subscriber net adds, which would make a grand total of over 12 million U-verse high speed Internet subscribers. There were also 73,000 U-verse TV subscribers added.

Randall Stephenson, AT&T chairman and CEO, commented on what AT&T’s future in 2015 would hold:

Our transactions with DIRECTV and Mexican wireless companies Iusacell and Nextel Mexico will make us a very different company. We’ll be unique in the industry because we’ll be able to offer integrated capabilities across a diversified base of services, customers, geographies and technology platforms. After we close DIRECTV, our largest revenue stream will come from business-related accounts, followed by U.S. TV and broadband, U.S. consumer mobility and then international mobility and TV.

Just a day ahead of earnings, Canaccord Genuity maintained a Hold rating and set its price target at $34. This only implied an upside of 3.5%. The highest listed analyst price target was $40 and implied upside of 21.8%.

Shares of AT&T closed Tuesday down 1% at $32.81. Following the release of the earnings report, the initial reaction in the post market was positive and shares were up about 1.5% at $33.30. The stock has a consensus analyst price target of $34.86 and a 52-week trading range of $31.74 to $37.48.

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