AT&T Inc. T is scheduled to report third-quarter 2024 earnings before the opening bell on Oct. 23. The Zacks Consensus Estimate for revenues and earnings is pegged at $30.55 billion and 59 cents per share, respectively. Earnings estimates for AT&T for 2024 have remained steady at $2.22 per share over the past 30 days, while the same for 2025 has jumped to $2.35 from $2.34 per share.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
T Estimate Trend
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Earnings Surprise History
The communications service provider delivered a four-quarter earnings surprise of 0.5%, on average. In the last reported quarter, the company pulled off an earnings surprise of -1.7%.
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Earnings Whispers
Our proven model does not predict an earnings beat for AT&T for the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
AT&T currently has an ESP of -6.18% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping the Upcoming Results
AT&T continues to enhance its network infrastructure, including 5G and fiber networks, to provide best-in-class coverage and capacity across the nation. The infrastructure investments position it for growth by ensuring widespread access to its services. AT&T's commitment to closing the digital divide underscores its dedication to fostering inclusive connectivity and driving socio-economic progress as the digital landscape evolves.
With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. An integrated fiber expansion strategy is expected to improve broadband connectivity for enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience.
During the quarter, AT&T entered into a definitive agreement with Unsupervised AI to unearth potential opportunities to improve key metrics while empowering its workforce with faster, smarter access to data insights. The deal with this Broomfield, CO-based software firm will enable AT&T to leverage AI (artificial intelligence) to help identify valuable patterns and key insights by analyzing various internal data sources to scale production and improve profitability. This is expected to identify more than $100 million worth of opportunities that could be deployed across the diverse business units of AT&T to augment its ROI (return on investments).
AT&T also collaborated with Oracle Corporation ORCL to support varied industry applications and deliver robust real-time communications. Oracle will integrate AT&T’s IoT connectivity and network APIs with its Enterprise Communications Platform to include features like IoT edge application management, simplifying complex integrations and network contracts for customers. Powered by Oracle Cloud Infrastructure, this unified system offers businesses the reliable connectivity and real-time data they need to drive new, essential services and experiences. These are likely to have generated incremental revenues for the Communications segment.
The Zacks Consensus Estimate for revenues from the Communications segment, which accounts for the lion’s share of total revenues, is pegged at $29.3 billion, while our model projects revenues of $29.24 billion.
However, AT&T faces stiff competition in the wireless market from other major carriers that are aggressively expanding their networks and improving their offerings. Consumer’s tendency to switch to various low-priced alternatives is hurting the company’s top line. It also has a large debt burden, which dents its competitiveness and limits growth potential. In addition, a challenging macroeconomic environment, inflationary pressures and business uncertainty are forcing consumers to have a conservative approach to higher-tier services.
Moreover, AT&T is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. High-speed Internet revenues are contracting due to the legacy Digital Subscriber Line decline, simplified pricing and bundle discounts. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate, affecting its growth potential to some extent.
Price Performance
Over the past year, AT&T has gained 46.1% compared with the industry’s growth of 50.4%, outperforming peers like Verizon Communications Inc. VZ but lagging T-Mobile US, Inc. TMUS.
One-Year Price Performance
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Key Valuation Metric
From a valuation standpoint, AT&T appears to be trading relatively cheaper than the industry but well above its mean. Going by the price/earnings ratio, the company shares currently trade at 9.41 forward earnings, lower than 12.56 for the industry but higher than the stock’s mean of 8.14.
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Investment Considerations
With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. For a seamless transition among Wi-Fi, Long-Term Evolution and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network. Its 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. It believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices.
However, spectrum crunch has become a major issue in the U.S. telecom industry with a saturated wireless market. Most carriers are finding it increasingly difficult to manage mobile data traffic, which is growing by leaps and bounds. The situation has become even more acute with the growing popularity of iPhone and Android smartphones as well as rising online mobile video streaming, cloud computing and video conferencing services. A steady decline in legacy services and uncertain business conditions are likely to affect its profitability.
End Note
With a Zacks Rank #3, AT&T appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. A saturated wireless market and price wars owing to competitive pressure have further eroded its profitability. Consequently, it might not be prudent to bet on the stock at the moment.
However, a single quarter’s results are not so important for long-term stakeholders, and investors already owning the stock could stay put. By investing steadily in infrastructure and pioneering new technologies, AT&T is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid postpaid subscriber growth and higher average revenue per user in the Mobility Service business. These, in turn, offer some enticing reasons for staying invested in the stock over the long term.
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