Earnings preview: AT&T to beat user exodus in Q1 on strength of wireless biz

Last week, AT&T (NYSE: T) sold its stake in on-demand video provider Hulu to the majority shareholders, leaving the market speculating about the future of its streaming service. The sale came at a time when the streaming sector is witnessing intense competition with the entry of new players like Disney+ (DIS). Currently, AT&T is gearing up to take on rivals with the recently acquired WarnerMedia, which is being reorganized with focus on video streaming.

The Dallas, Texas-based company is all set to unveil its first-quarter results Wednesday before the opening bell. Market watchers see a 19% growth in revenues to $45.11 billion in the March quarter – mainly reflecting the inputs from WarnerMedia – but forecast a one-cent decline in earnings to $0.85 per share.

The stable demand for its wireless services and the recent revision of TV packages, with a favorable pricing structure, bode well for the company in terms of revenue generation.  The top-line will also benefit from the new business model with focus on improving advertising content and data analysts.High operating expenses could be a drag on the bottom-line, including those related to acquisitions, as the world’s largest telecommunications firm looks to establish itself as a telecom-entertainment company. However, the main area of concern is the depletion of the company’s post-paid subscriber-base in recent quarters, which is expected to continue in the to-be-reported quarter, in contrast to the solid additions seen a year earlier.

The stable demand for its wireless services and the recent revision of TV packages bode well for the company in terms of revenue generation

In the December quarter, AT&T registered a double-digit increase in earnings to $0.86 per share, which topped analysts’ forecast by a penny. Supported solely by contributions from WarnerMedia, revenues climbed 15% to $48 billion. The company’s main business segments suffered from muted subscriber addition, especially the linear TV service.

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After recording strong cash flow growth and launching a debt reduction program last year, the management is planning to take forward the initiatives to strengthen the balance sheet further. The majority of the analysts following AT&T are bullish about the company’s market value. They have given the stock buy rating, with a consensus price target of $35.

Shares of AT&T witnessed significant volatility in the past twelve months when they lost about 3%, moving closer to the $30-mark. However, the stock had a positive start to 2019, and moved up 8% so far, outperforming the market.

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