Telecom & Wireless

AT&T Continues to Worry About COVID-19 Impact

AT&T Inc. (NYSE: T) reported second-quarter 2020 results before markets opened Thursday. The telecom giant reported adjusted diluted earnings per share (EPS) of $0.83 on revenues of $41.0 billion. In the same period a year ago, the company reported EPS of $0.89 on revenues of $45.0 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.79 on revenues of $41.1 billion.

GAAP EPS totaled $0.17, down from $0.51 in the same period a year ago. Exclusions totaling $0.66 a share included a noncash goodwill impairment for Vrio, merger-amortization costs, severance charges, merger- and integration-related expenses and other items. The adjustments did not exclude $0.09 related to the COVID-19 pandemic.

AT&T withdrew its fiscal year guidance in the first quarter. The company did say that it expects to continue its total dividend payout ratio to be at the low end of the 60% range.

The company expects the COVID-19 pandemic to continue to affect advertising revenues, largely as a result of disruption to sports programming. Lower revenues also are expected due to movie theater closings and delayed movie releases, and international wireless roaming charges also will be negatively affected due to the pandemic. Further losses of cable and satellite TV business (cord-cutting) as more customers transition to fiber broadband services will have a negative effect on third-quarter results as well.

Analysts’ consensus estimates for the third quarter call for EPS of $0.80 and revenue of $42.0 billion. For the full year, analysts are looking for EPS of $3.19 on revenue of $180.9 billion.

The company reported a quarterly loss of 151,000 net postpaid wireless subscribers and a two-basis-point decline in churn among postpaid consumers. Service revenues dipped by 1.1%, and operating income was up 0.7% to $5.8 billion.

In the company’s entertainment group, AT&T lost 886,000 premium TV subscribers but posted 225,000 Fiber net additions. Broadband revenue fell by 3.5% to $6.4 billion.

Subscribers to the company’s HBO and HBO Max services rose by 1.7 million year over year to 36.3 million. HBO revenue fell by 5.2% to $1.6 billion. Operating expenses rose by 32.5% due to higher expenses related to HBO Max. The operating margin in the HBO division dropped from 33.4% in the year-ago quarter to 6.9%.

AT&T shares traded up about 2.1% in Thursday’s premarket, at $30.80 in a 52-week range of $26.08 to $39.70. The consensus 12-month price target on the stock is $33.08, and the dividend yield at Tuesday’s closing price was 6.88%.