AT&T Posts Strong Q3 Results on Customer Growth

AT&T Inc. (T) has posted impressive third-quarter 2021 results, which surpassed analysts’ expectations on the back of customer growth in wireless, fiber and HBO Max. The telecommunications company has also updated its guidance for 2021.

Adjusted earnings increased 14.5% year-over-year to $0.87 per share, beating the Street’s estimates of $0.79 per share.

Revenues slipped 5.7% year-over-year to $39.9 billion but surpassed expectations of $39.1 billion. The results reflected the impact of the separation of the U.S. video business, other divested businesses, and reduction in Business Wireline revenues. These declines were partly mitigated by a rise in Mobility and WarnerMedia revenues.

Segment-wise, on a year-over-year basis, Communications reported a 3.8% rise in revenues. Markedly, the Mobility sub-segment, with a 7% rise in revenues, recorded 928,000 thousand postpaid phone net adds, 1.22 million postpaid net adds and 249,000 prepaid phone net adds. Additionally, Consumer Wireline (revenues up 3.4%) recorded 289,000 AT&T Fiber net adds and 37% penetration. However, Business Wireline revenues declined 5.2%. (See AT&T stock charts on TipRanks)

WarnerMedia segment revenues were up 14.2% year-over-year. The total number of global HBO Max and HBO subscribers stood at 69.4 million at the end of the third quarter, up 12.5 million from the same quarter last year. Additionally, domestic HBO Max and HBO subscribers rose 7.1 million to 45.2 million during the quarter. The average revenue per user (ARPU) for domestic subscribers stood at $11.82.

Latin America segment recorded a 6% year-over-year rise in revenues, mainly due to growth witnessed in Mexico. Notably, AT&T inked a deal to sell its Vrio operations to Grupo Werthein, which is likely to conclude in the fourth quarter of 2021.

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Looking ahead, the CEO of AT&T, John Stankey, commented, “We continue to execute well in growing customer relationships, and we’re on track to meet our guidance for the year…We also have clear line of sight on reaching the halfway mark by the end of the year of our $6 billion cost-savings goal.”

During the earnings call, Stankey said, “We’ve closed the DIRECTV transaction and continue to expect the WarnerMedia deal to close by midyear 2022. With these and other dispositions, we monetized or announced plans to monetize more than $55 billion of assets over the past year.”

For 2021, the company now projects adjusted EPS to be at the high end of the low- to mid-single-digit growth range and free cash flow to be about $26 billion. Additionally, HBO Max/HBO global subscriber is forecast at the target range of 70 million to 73 million subscribers.

Prior to the third-quarter earnings report, Bank of America Securities analyst David Barden reiterated a Buy rating on the stock with a price target of $36 (upside potential of 39.75%).

Barden noted that the company has shifted its focus towards connectivity, with wireless service at its center, and streamlining the business accordingly.

The analyst commented, “During the quarter, AT&T closed a deal to sell 30% of its DirecTV business to TPG for $7.6 billion ($7.1 billion in cash). The next divestment we expect to close is the LatAm satellite video business (Vrio) expected in early 2022, and then WarnerMedia (WM) which is expected to close in mid-2022…We expect AT&T to update investors on HBO Max subscriber growth and on the recovery of the advertising market. In our view, the current valuation incorporates a bearish outlook and out of favor investor sentiment, which we believe leaves room for a favorable rerating.”

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 5 Buys, 7 Holds and 1 Sell. The average AT&T price target of $32 implies 24.2% upside potential. Shares have lost 8.9% over the past year.

Website Traffic

According to SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, globally, the AT&T website recorded a 3% monthly growth, year-over-year, in visits in September, while year-to-date website growth, compared to year-to-date website growth in the previous year, came in at 16.7%. (See AT&T’s website traffic on TipRanks)

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