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AT&T sees big subscriber gains but stock dips after earnings

An earlier model of this story misstated AT&T’s GAAP earnings per share for the third quarter. It was 82 cents.

AT&T Inc. posted a giant quarter of subscriber features Thursday, however its shares had been barely down as some questioned the influence of promotions on the corporate’s development.

The telecommunications large noticed 1.22 million web additions inside its mobility enterprise for the third quarter, together with 928,000 postpaid cellphone web additions, which made for the corporate’s greatest quarter on the cellphone metric in additional than a decade. AT&T sees its community power and “constant, easy gives” as massive momentum drivers, Chief Monetary Officer Pascal Desroches mentioned on the earnings name.

The corporate’s postpaid cellphone churn remained low at 0.72% for the quarter, in contrast with 0.69% a yr earlier. AT&T mentioned that churn improved when adjusted for the Hold America Related program, by means of which telecommunications corporations pledged to proceed offering service to clients who had hassle paying their payments because of the pandemic.

The wi-fi {industry} has turn out to be extra promotional in recent times, and AT&T has been aggressive with its gives, however executives downplayed the influence of promotions on the corporate’s newest outcomes.

The offers are “one ingredient of this broader technique,” mentioned Jeffery McElfresh, the chief govt of AT&T’s communications enterprise, on the corporate’s earnings name. He additionally known as out AT&T’s extra “optimized” distribution channels and its “simplified” fee plans, and he mentioned that not all the firm’s clients benefit from the promotions.

“We all know, primarily based on these metrics that we see, that we’re including high-value clients and don’t consider that that is pushed uniquely by any form of subsidy or further money stream that occurs to be within the market,” he added.

A number of analysts, nevertheless, keyed in on the promotions of their notes to shoppers. “Mobility service revenues elevated by 4.6%, and, whereas the phase [earnings before interest, taxes, depreciation, and amortization] {dollars} are rising, the price of the retention promotions continues to weigh on margins (41.7% vs 43.1% within the earlier yr quarter),” Bernstein’s Peter Supino wrote.

Authorities stimulus checks and service gives are probably driving industry-wide subscriber development that’s far outpacing inhabitants development, MoffettNathanson’s Craig Moffett wrote, and people developments don’t appear significantly sustainable to him.

AT&T probably hopes that its “buyer features will finally translate into sooner service income development,” in keeping with Moffett, however AT&T would want to develop common income per consumer (ARPU) so as to take action, and proper now the metric is declining.

Shares of AT&T had been off 0.9% in Thursday afternoon buying and selling following the report, which additionally contained better-than-expected earnings-per-share numbers.

The corporate posted web earnings of $5.9 billion, or 82 cents a share, roughly double the $2.8 billion, or 39 cents a share, that AT&T reported within the year-prior quarter. After changes, AT&T earned 87 cents a share, up from 76 cents a yr earlier and above the FactSet consensus, which known as for 78 cents a share.

AT&T’s income declined to $39.9 billion from $42.3 billion, which the corporate mentioned mirrored the spinoff of its U.S. video enterprise in addition to decrease enterprise wi-fi income. Analysts tracked by FactSet had been modeling $40.6 billion, however Moffett famous that “the issue appears to be the inclusion in consensus of some forecasts which will have included a full quarter of video income,” whereas AT&T’s transaction to make DirecTV a separate firm really closed in early August.

Income for AT&T’s communications unit elevated to $28.2 billion from $27.2 billion. That included income from the corporate’s mobility unit, which rose to $19.1 billion from $17.9 billion as AT&T benefited from larger service and tools income.

The WarnerMedia enterprise noticed income develop to $8.4 billion from $7.4 billion. WarnerMedia benefited from larger content material income and noticed a “partial restoration from prior-year impacts of the pandemic,” per its launch. Subscription income elevated to $4.0 billion from $3.5 billion, primarily reflecting traction for the HBO Max streaming service. AT&T had 69.4 million international HBO Max and HBO subscribers on the finish of the third quarter.

AT&T anticipates that its full-year adjusted earnings per share will “be on the excessive finish of the low- to mid-single digit development vary” and the corporate mentioned that it’s “on monitor” with its free-cash-flow goal, which is within the “$26 billion vary.” AT&T additionally expects that its HBO Max and HBO international subscriber rely will fall on the “larger finish” of its 70 million to 73 million goal.

Shares of AT&T have declined 9.9% up to now this yr because the S&P 500
SPX,
+0.15%

has risen 20.8%.

https://www.marketwatch.com/story/at-t-sees-big-subscriber-gains-as-earnings-top-expectations-11634814603?rss=1&siteid=rss | AT&T sees massive subscriber features however inventory dips after earnings

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