Will Soft Communications Revenues Mar AT&T (T) Q3 Earnings?
AT&T Inc. T is scheduled to report third-quarter 2020 results before the opening bell on Oct 22. In the third quarter, the company is likely to have recorded lower revenues year over year from the Communications segment due to the adverse impacts of the coronavirus pandemic and continued infrastructure investments for 5G deployment across the country.
Factors at Play
The Communications segment has three business units — Mobility, Entertainment Group and Business Wireline.
In the third quarter, AT&T expanded its 5G network infrastructure in various markets to take the tally to 395 across the country, serving more than 200 million people. AT&T is benefiting from lower levels of wireless churn due to access to 5G on its unlimited wireless plans for consumers and businesses and growing adoption of Unlimited Elite wireless plans. The company continues to invest in its wireless and wireline networks to expand coverage and improve connectivity. These initiatives are likely to be reflected in the upcoming results.
During the to-be-reported quarter, AT&T expanded its collaboration with industry partner Accenture plc for the development of a private cellular network for energy manufacturing firm Phillips 66. The company also extended its alliance with Microsoft Corporation to facilitate secure and seamless cloud connectivity of IoT devices by diverse businesses across the globe. Such technology collaborations are likely to have translated into higher revenues for the Business Wireline division.
However, continued infrastructure investments for extensive fiber connectivity and the deployment of a standards-based nationwide mobile 5G network are likely to have affected the bottom line. AT&T has limited visibility into the extent of the impact of COVID-19. Moreover, less international travel due to travel restrictions in the wake of the virus outbreak is likely to have dragged down roaming revenues in the wireless segment. Furthermore, waiving of wireless voice and data overage fees for all customers and expanded eligibility for low-income Internet programs are likely to have drained the exchequer.
Q3 Developments
During the quarter, AT&T issued notices for the early redemption of three series of bonds worth $1.2 billion to improve its liquidity position and reduce the burgeoning debt burden through prepayment of upcoming debt maturities. The move is likely to de-risk its capital structure as the company prepares to navigate through the challenging macroeconomic environment.
Overall Expectations
The Zacks Consensus Estimate for revenues from Communications is pegged at $33,556 million, indicating a modest decline from $35,401 million reported in the year-ago quarter. Operating income is pegged at $7,788 million, implying a fall from $8,036 million reported in the prior-year quarter. The consensus mark for EBITDA from the segment stands at $12,464 million, suggesting a decline from $12,634 million.
The Zacks Consensus Estimate for total revenues of the company stands at $41,587 million, indicating a 6.7% decline from $44,588 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 77 cents per share. It had reported 94 cents in the year-earlier quarter.
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.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.53%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
ATT Inc. Price and EPS Surprise
ATT Inc. price-eps-surprise | ATT Inc. Quote
Zacks Rank: AT&T has a Zacks Rank #3.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Bandwidth Inc. BAND is set to release quarterly numbers on Oct 29. It has an Earnings ESP of +442.85% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Sensata Technologies Holding plc ST is +4.25% and it carries a Zacks Rank of 2. The company is set to report quarterly numbers on Oct 27.
The Earnings ESP for Corning Incorporated GLW is +0.59% and it has a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct 27.
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