AT&T Mixed Earnings Report Caused Stock To Bleed

ATT the stock fell nearly 9% after the company reported a 10.4% year-over-year fall in consolidated revenues at $41.0 billion for the fourth quarter ending December 31, 2021, as against $45.7 billion in the year-ago quarter. However, it exceeded Wall Street expectations of $40.44 billion.

The ATT stock opened at $26.98 and closed at $24.25.

The nosediving shares price triggered the stock activity to jump more than 100 percent, combined with nearly a 50% increase in trading volume.

The decline in revenue came in due to the divestment of the U.S. video business and Vrio combined with lower revenue from Business Wireline services. However, higher equipment sales within the Mobility division and better revenue growth within WarnerMedia business balanced the overall impact.

Segment Revenues:

Communications Operating revenues of the total segment jumped 2.4% to $30,206 million.

Revenues from the Business Wireline division fell 5.6% to $5,901 million as customers preferred to migrate from legacy products to more advanced IP-based offerings.

Mobility business attained a healthy gain of 5.1% YoY to $21,146 million on the back of improvement in service revenues, increasing 4.6% to $14,669 million owing to solid subscriber gains combined with an increase of 6.2% in equipment revenues to $6,477 million, owing to high-priced smartphone sales and other postpaid devices.

Consumer Wireline business revenue also jumped 1.4% to $3,159 million as the average revenue per user of fibre broadband increased.

Overall, ATT saw a net increase in total wireless subscribers of 5.3 million to reach 201.8 million in service. Over 1,285,000 postpaid net additions and 24,000 prepaid phone net additions were made during the year as the work-from-home trend continued in 2021.

Postpaid churn stood at 1.02% in the reporting quarter against 0.94% in the year-ago quarter. The postpaid phone-only average revenue per user (ARPU) declined 0.7% year over year to $54.06 owing to promotional discounts.

WarnerMedia

The consolidated revenue of the segment stood at $9,873 million, up 15.4% year over year.

Revenue from subscriptions jumped to 5.4% to $3,817 million as HBO Max and HBO added 13.1 million YoY subscribers and 4.3 million QoQ.

Advertising revenues attracted $1,645 million, down 12.9% owing to fewer political ads. Content revenues jumped 45% to $4,411 million as theatrical product sales and TV licensing brought in the business.

Earnings:

ATT’s adjusted earnings for the period under review came in at 78 cents per share, up 4% YoY from 75 cents and 2 cents ahead of the Street consensus forecast.

Other Highlights:

According to its press release, for 2021, ATT remained the industry leader in postpaid phone net additions, gaining more subscribers than in the last decade and adding more than 1 million fibre subscribers for the fourth consecutively. Also, it exceeded the high end of its outlook for global HBO Max and HBO subscribers with nearly 74 million subscribers at the end of 2021, making space for rivals like Netflix challenging.

At the end of the quarter, global HBO Max and HBO subscribers stood at 73.8 million as it managed to attract domestic as well as international retail subscribers, unlike Netflix, which is facing headwinds in gaining subscribers.

At the end of the quarter, domestic HBO Max and HBO subscribers stood at 46.8 million as against 41.5 million a year ago.

ATT CEO John Stankey, separately, informed that the merger of Warner Media and Discovery should be completed in the second quarter, slightly earlier than anticipated. The $43 billion deal that will create a new company named Warner Bros. Discovery is likely to close as soon as April but not later than June-end.

Adjusted earnings for the full year stood at $3.40 a share compared to $3.18 a year ago.

Consolidated adjusted operating income for the quarter stood at $6,649 million against $7,814 million a year ago.

Operating income for the communications segment came in at $6,451 million, while Warner Media reported a decline of 37.9% to $1,579 million.

Adjusted EBITDA decreased to $11,301 million from $12,889 million. For the communications business, adjusted EBITDA came in at $10,607 million as against $10,422 million a year ago. However, In Q4 FY 21, 4 of the 5 segments in ATT saw a decline in year-on-year EBITDA, except Mobility, which reported a 4.3% increase in EBITDA. Similarly, 4 of the 5 segments saw a sequential fall in EBITDA, except Consumer Wireline, which reported a 3.3% rise.

Adjusted EBITDA for the Warner Media segment came in at $1,744 million against $2,719 million in the prior-year quarter.

“The results were weak, with EBITDA (earnings before interest, taxes, depreciation and amortization) missing in every segment,” MoffettNathanson analyst Craig Moffett said in an email. “And there is no pro-forma growth here whatsoever.”

Outlook:

For fiscal 2022, ATT expects per-share earnings in the range of $3.10 to $3.15. The telephone services provider company sees its revenue growth in the low single digits.

Analysts forecast 2022 earnings of $3.16 per share on revenue of $156.3 billion, up from $153.2 billion.

“A year and a half ago, we began simplifying our business to reposition ATT for growth and we’re extremely pleased with how we’ve executed on that commitment,” said CEO John Stankey in a statement.

“We ended 2021 the way we started it – by growing our customer relationships, running our operations more effectively and efficiently, and sharpening our focus. Our momentum is strong, and we’re confident there is more opportunity to continue to grow our customer base and drive costs from the business.”

“We’re at the dawn of a new age of connectivity. Our focus now is to be America’s best connectivity provider and also ensure our media assets are positioned to grow and truly become a global media distribution leader,” he added. “Once we do this, we’ll unlock the true value of these businesses and provide a great opportunity for shareholders.”