AT&T shares declined Thursday despite an earnings beat in a quarter with a lot of moving parts due to recent business divestments.
While the company raised its annual forecast for mobility service revenue in light of stronger-than-expected customer additions, it also pulled down its free-cash flow outlook to account for factors such as higher investment spending linked to customer growth and expectations around the timing of collections.
The company posted net income of $4.1 billion, or 56 cents a share, compared with $1.5 billion, or 22 cents a share, in the year-earlier quarter. On an adjusted basis, AT&T
earned 65 cents a share, down from with 73 cents a share a year prior, but up from 64 cents a share on a standalone basis that focuses on continuing operations. The FactSet consensus for the latest quarter was for 61 cents a share.
AT&T’s operating revenue fell to $29.6 billion from $35.7 billion, while analysts were expecting $29.5 billion in revenue. AT&T divested its video business in the third quarter of 2021, so the company said that the drop in revenue reflects impacts to the year-earlier figure from that business and others that didn’t qualify as discontinued operations. The fall also reflects a decline in business wireless revenues, which were partly offset by higher revenue in the mobility segment.
The stock dropped 2.3% in premarket trading. It has gained 1.3% over the past three months, to outperform the S&P 500 index’s
9.9% selloff over the same time.
The company spun out its WarnerMedia business April 8 into what’s now Warner Bros. Discovery Inc.
so it is now more focused on its telecommunications operations.
AT&T said it saw the best second quarter for postpaid phone net additions in more than a decade as it delivered 813,000. Postpaid phone churn was 0.75%.
Additionally, the company pointed to 316,000 AT&T Fiber net additions in its consumer-wireline business.
“Our results the last eight quarters demonstrate that our deliberate strategy of focusing on growth is helping us gain valuable customer relationships, and we’re confident in our ability to maintain this momentum while also continuing to reduce debt and deliver an attractive dividend,” Chief Executive John Stankey said in a release.
AT&T said it now expects 4.5% to 5% growth in mobility service revenues for the full year. The company said it had been expecting 3% growth or better when outlining targets around its March investor day.
The telecommunications giant also expects 2022 free-cash flow in the $14 billion range. It had given a target for $16 billion in pro-forma free-cash flow at its investor day.