Analysts: AT&T Earnings Weren't That Bad

AT&T, Inc. T dropped 4.3 percent Wednesday after the company missed consensus estimates for revenue and wireless subscribers in the fourth quarter.

AT&T’s revenue of $47.99 billion missed estimates of $48.5 billion. AT&T also reported net additions of 134,000 phone subscribers, below analyst estimates of 308,000. The company also lost 403,000 satellite TV subscribers and 14 percent of its DirecTV Now streaming subscribers in the quarter.

Several Wall Street analysts have weighed in on AT&T’s disappointing numbers. Here’s a sampling of what they’ve had to say.

Prioritizing The Balance Sheet

Morgan Stanley analyst Simon Flannery said there were some encouraging signs for investors in the fourth quarter, but AT&T has limited near-term financial visibility as it digests its Time Warner acquisition.

“We continue to believe that the current stock price overly discounts the risks, and that the stock can rally as visibility improves over the course of the year, the company delevers, and the Time Warner appeal is resolved,” Flannery wrote in a note.

Raymond James analyst Frank Louthan said AT&T is prioritizing deleveraging its balance sheet in 2019 and should be able to hit its 2.5 times target by the end of the year.

“We believe the video sub trends will be offset as marketing packages with mobility and FirstNet take hold and drive improved profitability per sub, but this could take time for investors to see the signs,” Louthan wrote.

Buying Opportunity

Bank of America analyst David Barden said that, despite the quarter's shortcomings, AT&T is moving in the right direction.

“Within the wireless business, which accounts for 50% of total EBITDA, service revenue grew, net adds were positive, and EBITDA beat by a material amount as the handset upgrade rate was much lower than expected,” Barden wrote.

Tigress Financial analyst Ivan Feinseth said better-than-expected free cash flow growth was a highlight of the quarter.

“I believe the opportunity exists for significant gains from current levels and continue to recommend purchase,” Feinseth wrote.

Ratings And Price Targets

• Bank of America has a Buy rating and $37 target.
• Morgan Stanley has an Overweight rating and $37 target.
• Raymond James has a Market Perform rating.

AT&T traded at $29.64 per share Thursday morning.

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