AT&T Inc. (NYSE: T) is scheduled to report its earnings in the coming weeks, and one analyst is getting out in front of the curve and issuing a call ahead of the results.
Nomura Instinet reiterated a Buy rating with a $43 price target, implying upside of 15.6% from the most recent closing price of $37.19.
The firm expects third-quarter results to be more positive than not. Nomura noted that AT&T’s reticence to match Verizon’s price cut implies confidence in wireless, and activist firm Elliott Management may speed cost savings and asset sales.
Nomura believes that a letter from Elliott may spur a bit more cost savings and asset sales. That letter to the AT&T board calls for changes in management, as well as a new strategy for the Wireless division. Elliott hopes to raise EBITDA margins by $5 billion by trimming SG&A, real estate and network operations. While much of Elliott’s plan is consistent with AT&T’s existing strategy, Elliott’s involvement may speed progress. Nomura does not expect AT&T to divest DirecTV.
The one-time video subscriber impact of carriage disputes with CBS and Nextstar could be about 300,000. Nomura now models a million video subscriber losses (consensus estimates are calling for 900,000), although it believes EBITDA stability remains on track.
In the report, Nomura commented on AT&T’s competition:
We reduce our WM EBITDA estimate to better reflect difficult comps with 3Q18’s Crazy Rich Asians. AT&T has yet to disclose HBO Max pricing; we expect it to be higher than Netflix or Disney+. In contrast to Disney (but like Comcast), AT&T will not pull all content from third-party OTT providers. We expect specific detail on the DTC offering and strategy at WarnerMedia’s analyst day on October 29.
For the third quarter, consensus estimates are calling for $0.93 in EPS and $45.17 billion in revenue. The same period of last year reportedly had $0.90 in EPS and $45.74 billion in revenue.
Shares of AT&T were trading at $37.30 on Friday, in a 52-week range of $26.80 to $38.75.