Wireless Growth Keeps Driving AT&T Earnings, and Dividends

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AT&T Inc. (NYSE: T) has reported its third quarter earnings showing earnings growth, followed by gains in wireless and a record in its Uverse numbers. Earnings rose more than fourteen percent to $0.72 in earnings per share. Outside of significant items, earnings were up 6.5% to $0.66 per share. AT&T’s consolidated revenues rose by 2.2% up to $32.2 billion. Thomson Reuters had estimates of $0.65 on adjusted earnings and $32.19 billion in revenues.

Operating expenses also rose to $26.0 billion versus $25.4 billion, and operating income was $6.2 billion versus $6.0 billion. The operating income margin was unchanged at 19.2%.

Cash from operating activities totaled $9.2 billion in the quarter, and capital spending was $6.0 billion. Free cash flow totaled $3.2 billion.

AT&T repurchased 55 million shares of common stock for $1.9 billion during the quarter. It also still had 216 million shares remaining on the current buyback authorization plan as of the end of the quarter. The company did say that it expects to make future repurchases opportunistically.

Here are some brief notes on the quarter:

  • Total wireless revenues (including equipment sales) rose 5.1 percent year over year to $17.5 billion, and of that the service revenues rose 3.7 percent to $15.5 billion.
  • Postpaid phone-only average revenue per user rose 3.1 percent.
  • AT&T posted a net increase in total wireless subscribers of 989,000 in the third quarter and net adds include 178,000 smartphones and 388,000 tablets.
  • AT&T added 1.2 million postpaid smartphone subscribers – some 75 percent, or 50.6 million, of AT&T’s postpaid phone subscribers had smartphones vers 66 percent or 44.5 million a year ago.
  • AT&T’s third-quarter wireless operating income margin was 26.4 percent versus 26.9 percent in the year-earlier quarter.
  • U-verse had its first billion dollar month in revenue ever and reached 10 million subscribers.
  • Total third-quarter wireline revenues were $14.7 billion, down 1% versus the year-earlier quarter and down 0.7% sequentially.
  • Total U-verse revenues grew 28.1% year over year and were up 4.4% sequentially.
  • Total revenue from business customers was down 2.6% to $8.8 billion and was down 0.9% sequentially.

AT&T shares closed up five-cents at $35.28 against a 52-week trading range of $32.71 to $39.00 and the consensus price target from analysts is $37.61. As a reminder, Barron’s recently opined that AT&T’s lagging share price could soon catch up and rise back to $40.

AT&T is the king of DJIA dividends at a 5.1% dividend yield.

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