AT&T (NYSE: T) Stock Down After Earnings Miss Today; More Challenges Remain By Kyle Anderson

AT&T Inc. (NYSE: T) stock was down 1.5% in after-hours trading today (Wednesday) after the company reported earnings per share (EPS), excluding significant items, of $0.62 on consolidated revenue of $32.6 billion. Both those figures missed consensus estimates, which projected EPS of $0.63 on $33.2 billion in revenue. Second-quarter EPS was down from the year-ago period when the company reported $0.67. Revenue was up slightly from last year's total of $32.08. The post AT&T (NYSE: T) Stock Down After Earnings Miss Today; More Challenges Remain appeared first on Money Morning - Only the News You Can Profit From .

AT&T Inc. (NYSE: T) stock was down 1.5% in after-hours trading today (Wednesday) after the company reported earnings per share (EPS), excluding significant items, of $0.62 on consolidated revenue of $32.6 billion. Both those figures missed consensus estimates, which projected EPS of $0.63 on $33.2 billion in revenue.

T stock

Second-quarter EPS was down from the year-ago period when the company reported $0.67. Revenue was up slightly from last year's total of $32.08.

Some of the highlights from today's report included the addition of 2 million wireless and wireline broadband connections for the company, and an increase in wireless revenue of 3.7%.

The company also reported the addition of 700,000 "postpaid" smartphone users. Postpaid refers to users who pay a monthly bill depending on usage. In total, the company now has 61 million smartphone users, both prepaid and postpaid.

Overall, the company said its subscriber growth this quarter was its highest in five years.

However, many of the numbers showed a slip from the year-ago period. Operating income was $5.6 billion compared to $6.1 billion last year, while operating income margin was 17.2% compared to 19.1% a year ago. The company also reported an increase in operating expenses, from $26 billion to $27 billion.

AT&T NYSE: T Jul 23 04:07 PM loading chart... Price: 35.88 | Ch: -0.06 (-0.2%)

"The quarter was marked by several transformative moves to grow our wireless, broadband, and video services," AT&T Chairman and Chief Executive Officer Randall Stephenson said in a statement. "We announced our intent to acquire DirecTV, which will improve our video position and our ability to bundle broadband, mobility, and video services nationally."

In May, AT&T announced that it had purchased DirecTV (Nasdaq: DTV), the largest satellite television provider in the United States, for a reported $48.5 billion. The move increased AT&T's video customer base by 20.3 million people. Before the deal, AT&T boasted about 5.7 million video customers.  

That deal also made AT&T the second-largest provider of television subscription services behind the combined Comcast Corp. (Nasdaq: CMCSA) and Time Warner Cable Inc. (NYSE: TWC).

The AT&T and DirecTV deal is still pending regulatory approval, but it would allow the company to offer much more extensive "bundle" options to its customers. The deal would also improve the company's network reliability and create faster broadband for customers.

While the deal with DirecTV would be a bright spot for AT&T, the actions of its wireless competitors have been impacting T stock...

Challenges Facing AT&T (NYSE: T) Stock

Earlier this year, T-Mobile US Inc. (NYSE: TMUS) unveiled a plan meant to directly attack its competitors. The wireless plan does not require a customary two-year contracts like AT&T and other major wireless companies like Verizon Communications Inc. (NYSE: VZ) typically require.

In an even more aggressive move, T-Mobile advertised that it would pay portions of the cancellation fees for customers switching to its services.

"AT&T remains challenged by aggressive pricing plans by direct competitors for iPhones and smartphones," analysts at Zacks Investment Research told clients this week. "Smaller wireless carriers also offer cost-effective voice and data plans. This may negatively influence AT&T's high-end handset sales and challenge subscriber retention."

While AT&T did report high subscriber growth, its bottom-line was clearly impacted in today's earnings report. T stock has also shown few signs of life lately.

In the last 12 months, AT&T stock is up just 0.3%, while the Dow Jones Industrial Average has gained nearly 10% and the S&P 500 has gained 17.5%.

In the same time frame, competitors have also outgained T stock. Sprint Corp. (NYSE: S) has gained 31%, T-Mobile has gained nearly 30%, and Verizon has gained a more modest 1.2%.

Currently, 23 analysts polled by Thomson/First Call have an average price target of $36.09, and increase of just 0.6% from today's closing price.

T stock could be in further trouble should the DirecTV deal not meet regulatory approval. Clearly, the company's highest subscriber growth in five years isn't having enough of an impact on the firm's bottom line.

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The post AT&T (NYSE: T) Stock Down After Earnings Miss Today; More Challenges Remain appeared first on Money Morning - Only the News You Can Profit From.

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