AT&T: Q4 EPS In Line; Revs, EBITDA Light; Stk Dn 2%
AT&T (T) fourth quarter results were a mixed bag for investors, with profits in line with expectations, but revenue and EBITDA a bit below expectations.
Revenues were $30.3 billion, below the Street consensus of $30.55 billion. EBITDA of $10.7 billion was below the consensus estimate of $11.1 billion. Profits were in line at 71 cents a share.
AT&T said it had a net gain of 2.7 million wireless subscribers, “the best-ever quarterly increase by any U.S. wireless company,” for which it can no doubt thank Apple (AAPL), which sold 2.3 million iPhones in the quarter. The company had 231,000 U-verse TV customers at quarter end, up from 126,000 at the end of Q3; the company says it is on track to reach 1 million by the end of 2008.
The company said it sees revenue growth for the full year in the mid-single-digit range, with growth in mid-single-digits or better in subsequent years. For 2008, AT&T sees operating income margin in the 25%-26% range, up from 23.8% in 2007, “reflecting continued wireless progress and increased expense savings from merger synergies and operational initiatives, which are expected to offset increased expense for deployment of AT&T U-verse services.”
AT&T sees double-digit growth in adjusted EPS for 2008, with free cash flow of $16 billion to $17 billion.
The company also unveiled a new 400 million share buyback authorization, representing about 6.6% of shares outstanding.
Craig Moffett, an analyst with Bernstein Research, notes that the weak revenue and EBITDA figures reflect weakness in the wireline business, with customer primary access lines down 656,000 in the quarter, up from 468,000 in Q3. Total access lines were down 1.3 million in the quarter, from 1.2 million in the previous quarter. He also noted that broadband additions of 396,000 was below his forecast of 503,000, and down from 566,000 last quarter. Moffett contends strength in wireless is the key story line in the results, though. He thinks the stock looks attractive after its recent sell-off, with a 4.4% dividend yield and a 7% estimated 2008 cash flow yield.
Nonetheless, the stock is sagging. AT&T is off 65 cents, or 1.8%, at $36.04.
Why is it down today, is it really because of its mention of Iphone as driver of sales and the street doesnt believe that? Missing something.
As I pointed out, revenues and cash flow were light.
Like Moffet said though, this reflects weakness in the wireline side. Just very surprised in a good tech tape to see it THIS down on revs that missed in light of bigger story.
Definitely negative…4mm phones sold from Apple worldwide. Now 2mm of them are paying customers at AT&T. Maybe, best that 500k in Europe providers. That means that nearly 1.5mm are unlocked or in inventory…and thus maybe are not the big revenue share with AAPL that many believe. What do you think?
Regarding the difference in revenue expectations…what’s 2.5 million among analysts and investors for such a large company? Earnings were still at $.71 per share. It signifies nothing that shouldn’t already been expected. The stock drops everytime T has a great quarter. If the CEO were to sneeze at an investor conference, the stock would drop. It’s ridiculous!
I agree that the shocking news from all of this is that 1.7m iPhone users are dweebs who are using the easily usable unlocking software, confirming what we already knew. The device is too expensive for most bods except dweebs who can cheat (although having to update the firmware regularly)
Tech Trader Daily is a blog on technology investing written from Palo Alto, California by long-time Barron's West Coast Editor Eric J. Savitz. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields.
