Here are highlights from Friday’s Analyst Blog:
Earnings Preview: AT&T
AT&T Inc. T April 24 57 cents
Looking at surprises, AT&T had average negative surprise of 0.32% in the trailing four quarters. In the year-earlier quarter, the company did not surprise us by reporting in line earnings with our expectation.
At the fourth quarter 2011 conference call, AT&T provided guidance for fiscal 2012. The company projected consolidated revenue, including post-paid ARPU, to grow 2% year over year. AT&T also guided consolidated margin to expand further on increasing wireless margins and stable wireline margin. Accordingly, earnings per share would increase in the mid single-digit range, leading to further earnings acceleration in the years ahead.
Fourth Quarter Flashback
Apple Inc. AAPL
Wireless revenue advanced on the back of strong data revenues and subscriber growth. Rapid adoption of smartphones including iPhone 4S, healthy prepaid and reseller subscriber count along with growth in tablets and connected devices such as automobile monitoring systems and security systems led to the growth in retail wireless subscribers. Quarterly post-paid additions were the highest in five years.
Despite the solid momentum for AT&T U-verse and strategic services, Wireline revenue dipped on weakness in voice and legacy data products.
Fiscal 2011 Flashback
AT&T exited the year with increasing top line but decreasing bottom line. Wireless business remained healthy while the Wireline business was a turnaround story. The company continues to enjoy its leadership in WiFi and boasts of the best Internet speeds in the industry. AT&T is the only US carrier that provides 4G network through both Long Term Evolution (LTE) and High-Speed Packet Access Plus (HSPA+) technologies.
Agreement of Analysts
Estimates reflect a negative bias for both the first quarter and fiscal 2012 over the last 30 days. For the first quarter, 6 analysts out of 24 made downward revisions while 3 moved in the opposite direction. For fiscal 2012, out of the 31 covering analysts, 6 revised their estimates downward while 3 revised it positively.
Google Inc. GOOG
Verizon Communications Inc. VZ
Sprint Nextel Corp. S
Moreover, AT&T is facing a potential strike threat in its wireline division in the East, Midwest, West and legacy should it fail to negotiate the new labor contract with them; the strike has not yet been called.
The analysts believe these negatives offset AT&T’s strong subscriber count and average revenue per user, which is driven by increased penetration of smartphones and iPhones, in the U.S. market in particular.
Magnitude — Consensus Estimate Trend
57 cents 58 cents
We expect this year to be a strong with continued growth in revenue, earnings per share and free cash flow as well as margin expansion. Strong adoption of iPhones and Android smartphone sales coupled with the LTE networks, expanding U-verse services, entrance into cloud computing and hotel WiFi businesses are expected to boost the company’s future profitability.
However, persistent declines in traditional voice access lines, aggressive pricing plans by rivals, iPhone subsidies and intense competition from cable companies and other alternative services providers are risks to the stock.
We are currently maintaining our long-term Neutral recommendation on AT&T. The stock retains a Zacks #3 (Hold) Rank for the short term (1-3 months).
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Leon Zacks http://at.zacks.com/?id=5518
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
SOURCE Zacks Investment Research, Inc.