AT&T meets Q3 revenue forecast; misses on earnings

AT&T Inc. (T) missed earnings estimates for the third quarter of 2018 but revenues came in line with expectations. The stock was down 5.8% in early trading hours on Wednesday.

Consolidated revenues grew 15.3% to $45.7 billion, driven by gains in Mobility and WarnerMedia. Excluding certain items, revenues increased 17.5%. Declines in domestic video, legacy wireline services and Vrio were offset by growth in wireless equipment and services, WarnerMedia and Xandr.

Net income attributable to AT&T improved to $4.7 billion or $0.65 per share from $3 billion or $0.49 per share in the prior-year period, driven by gains in the wireless business and WarnerMedia. WarnerMedia was accretive in its first full quarter, contributing $0.05 to EPS. Adjusted EPS grew 21.6% to $0.90.

The company reaffirmed 2018 guidance for adjusted EPS at the high end of the $3.50 range, free cash flow at the high end of the $21 billion range and net capital expenditures at the $22 billion range.

AT&T reported revenue growth in Mobility and WarnerMedia while the Entertainment Group, Business Wireline and Latin America segments posted declines. In Mobility, total wireless revenues rose 3.3%, helped by an increase in equipment revenues.

Higher sales of postpaid smartphones boosted wireless equipment revenues by 36.4% in the quarter. Total wireless net adds were 4.3 million, with 3.4 million in the US, driven by connected devices and prepaid.

In the Entertainment Group, revenues fell due to lower video revenues and declines in linear TV subscribers while in Business Wireline, the declines in legacy products were partly offset by growth in strategic business services.

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The growth in WarnerMedia revenues during the quarter was driven by revenue increases in all three operating units, helped by higher subscription revenues at Turner and HBO, and higher TV licensing revenues at Warner Bros. WarnerMedia benefited from the releases of the hit films Crazy Rich Asians, The Nun and The Meg.

AT&T saw revenues decline in Latin America due to foreign exchange pressures. Revenues in Mexico were hit by competitive pricing, which was partly offset by gains in equipment revenues and subscriber growth, while Vrio revenues were hit by Forex impacts.

In August, AT&T acquired AppNexus. Revenues from AppNexus were included in the Xandr business unit revenues along with revenues from AdWorks. Total Xandr revenues rose 33.6% year-over-year. Excluding AppNexus, revenues were up 22%.

With regards to its 5G plans, AT&T extended 5G Evolution wireless technologies to 239 markets, and plans to reach 400 markets by the end of 2018. The company plans to make 5G Evolution available to more than 200 million people in the first half of 2019.

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