AT&T’s earnings were enough to end the 10-day losing streak. Why here



        AT&T
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   The 10-day streak is set to end after a better-than-expected earnings report on Thursday morning. 

Investors sold AT&T stock ahead of their third-quarter results, with the report losing a 10-day streak of over 7%. It pushed stocks to their lowest level in nearly a decade.

The results of Thursday morning show that the recent negativity has been overcome. AT&T (Ticker: T) stock was up 5.5% in morning trading, and down 0.1%

S&P 500.

But both AT&T bulls and bears will have much to indicate in the report.

The telecom and entertainment group reported expected revenue and strong-than-expected revenue for the third quarter, despite pandemic-induced pain in their TV and movie assets. AT & T’s networks fared well: the company had predicted even the most optimistic analyst compared to much stronger wireless and Internet subscriber growth. But the decline continued elsewhere – think DirecTV — and AT & T’s cash flows remain a number of heavy demands.

The company earned adjusted 76 cents per share in the third quarter, 94 cents in the same period in 2019, and on par with analysts’ forecasts. It hit $ 42.3 billion on the revenue line, compared to Wall Street’s $ 41.6 billion, up from $ 44.6 billion a year earlier. Adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, missed just $ 13.2 billion, versus $ 13.7 billion forecast and $ 15.1 billion last year.

AT&T estimates that Kovid-19 related effects have reduced its earnings per share by 21 cents, which would otherwise be 3 cents higher than a year earlier. The most impact was felt at WarnerMedia, where movie theaters closed, television production was disrupted and delays at sporting events impacted revenue and profits. Sales fell 10% per year to $ 7.5 billion, while operating income fell 38% to $ 1.8 billion.

HBO and HBO Max — launched in May — reached 38 million combined customers in the US at the end of the third quarter. It was ahead of the 36 million that AT&T targeted for the end of that year, and was on its way to its 50 million-customer forecast by 2025.

The AT&T wireless phone business continued to be a vertical of the company’s portfolio. Revenue was $ 17.9 billion, 1% year-on-year, although operating profit slipped 1% to $ 5.7 billion. The company added 1.1 million postpaid customers on a large scale – meaning wireless customers receiving monthly bills. The analyst estimates ranged from a 100,000-customer gain to a 353,000-customer loss. Prepaid customers reached 245,000, ahead of 94,000 forecasts.

AT&T’s Entertainment Group was the story of two trends in the third quarter. Satellite and cable TV subscribers continued to cancel, with a loss of 590,000 DirecTV, U-verse, and AT&T TV subscribers. The growth of broadband Internet subscribers was strong, however, as people stuck at home upgraded their connections for work and entertainment. AT&T added 357,000 fiber customers to its best in the last quarter, with losses totaling 158,000 broadband broadband net distributions slowing connections.

However, DirecTV did not account for the decline, and Entertainment Group’s revenue was down 10% from a year earlier to $ 10.1 billion, while operating income fell 28% to $ 800 million. Business Wireline reported revenue and operating income down 2.5% to $ 6.3 billion and $ 1.2 billion, respectively.

“It’s very difficult to make a hole in this earnings report,” says Jim Boote, CIO of dividend-investment investor Brentview Investment Management. “Weak area, [DirecTV,] Did better than expected. The wireless business was very strong, with over 1 million added to it. If anything, this earnings report shows the stability of dividends, which a lot of investors were worried about. “

On Thursday’s earnings call, CFO John Stephens emphasized AT & T’s commitment to its dividend, which currently yields 7.8 billion a year. Management now expects to show at least $ 26 billion in free cash flow in 2020 — including $ 8.3 billion in the third quarter and a dividend payout ratio in the high-50% range.

AT&T paid $ 2.9 billion in debt in the quarter and its net-debt-to-adjusted Ebitda stood at around 2.7 times at the end of the third quarter.

Bernstein analyst Peter Supino said on Thursday morning that while rigging in the media is stable, it undermines print stem concerns, leading to epidemiological disorders in the competitiveness and financial position of the company. “We believe the share price reflects a fairly uncertain outlook, and we are seeing mobility as the competitive environment develops.”

With a $ 32 price target, Supino rated AT&T stock at par with the hold.

Rivals share

Verizon Communications

(VZ) and

T-Mobile US (TMUS)

Since the beginning of 2020 there has been an increase of 4% and 43% respectively, while AT&T has lost 27% after the dividend.

S&P 500

8% is back.

Write Nicholas Jasinski to [email protected]

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