Home News AT&T’s Q4 earnings may have dipped, but the stock remains undeterred

AT&T’s Q4 earnings may have dipped, but the stock remains undeterred

by SuperiorInvest

Key things

  • AT&T’s subscriber growth likely moderated in the fourth quarter, which was reflected in revenue and earnings.
  • But investors boosted AT&T shares by 22% in the last quarter, handily outperforming the broader telecom sector.
  • AT&T’s subscriber growth continues to benefit from the popularity of HBO Max.

AT&T Inc.’s profit for the fourth quarter (T), the telecommunications firm, which traces its origins to telephone inventor Alexander Graham Bell, fell by as much as a fifth, capping a year in which its still-strong subscriber growth moderated while its shares defied broader market losses.

Net income at AT&T, which now focuses on wireless and broadband services, fell a projected 21% to $4 billion, or 56 cents a share, according to Visible Alpha estimates. Revenues probably fell 23% to $31.4 billion. In the same period a year ago, the company earned $5 billion, or 78 cents per share, on revenue of $41 billion.

AT&T Key Statistics
4th quarter 2022 (estimated) Q4 2021 Q4 2020
Adjusted EPS $0.56 $0.78 $0.75
Revenues $31.4 billion $41.0 billion $45.7 billion
Wireless Subscriber Net Gain/(Loss). (27.8%) 4.6% 810.4%

Source: Visible Alpha

AT&T’s declining subscriber growth partly reflects a recovery from the spike in growth it experienced during the pandemic outbreak, when the company began rolling out 5G services and launched HBO Max as its new streaming service. AT&T has since spun off its WarnerMedia unit, including HBO Max, but retained the ability to bundle the service into its offering to wireless customers.”

AT&T shares rose 22% in the fourth quarter and 6% for the full year 2022, defying broader global financial market woes. In an uncertain economic environment, the annual company dividend yield— at 5.8%, the 10th highest in the S&P 500 — remains a key feature for investors. By comparison, the broader S&P 500 index of telecommunications services fell 2% in the fourth quarter, ending a dismal year in which it fell 40% (see chart below).


Maximum benefits of HBO streaming

Visible Alpha estimates that AT&T added 927,000 subscribers on a net basis in the quarter, down from 1.3 million in the fourth quarter of 2021. But ahead of the launch of HBO Max in mid-2020, the company lost subscribers in five of its previous eight fiscal quarter. Since launch, net subscriber gains have topped 800,000 in each quarter, easily outpacing rival Verizon’s growth (VZ).

Despite the subscriber gains, AT&T’s revenue hasn’t returned to pre-pandemic levels, when its quarterly sales routinely hit the mid-$40 billion mark. The fourth quarter will likely mark the sixth in a row that revenue has fallen at least 5% year-over-year, and the company has increased revenue in just two quarters since mid-2019.

At the same time, however, the company dramatically reduced costs. The WarnerMedia division helped reduce debt and operating expenses likely fell 25% in the fourth quarter, according to Visible Alpha.

Those cuts and the company’s relatively solid subscriber momentum, especially compared to Verizon, should help its stock perform well in turbulent economic and financial market conditions, Goldman Sachs said in a recent research note.

“We believe that AT&T is in a better financial and strategic position (than Verizon) and that the stock should maintain a premium because not only is it showing significantly faster wireless growth, but it looks better to report growing EPS (earnings per share) and better dividend coverage.” ”, according to a Goldman Sachs report.

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