A month has gone by since the last earnings report for AT&T (T). Shares have added about 9.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is AT&T due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
T Beats Q4 Earnings Estimates on Solid Subscriber Growth
AT&T reported relatively healthy fourth-quarter 2024 results with adjusted earnings and revenues beating the respective Zacks Consensus Estimate. The company witnessed solid wireless traction and customer additions, which were partially offset by lower demand for legacy voice and data services. AT&T recorded strong subscriber growth backed by a resilient business model and robust cash flow position, driven by a diligent execution of operational plans. AT&T expects to continue investing in key areas of 5G and fiber and adjust its business according to the evolving market scenario to fuel long-term growth.
Net Income
On a GAAP basis, AT&T reported a net income of $4.03 billion or 56 cents per share compared with $2.13 billion or 30 cents per share in the year-ago quarter. The significant improvement was primarily attributable to higher contributions from the DIRECTV investments during the quarter.
Excluding non-recurring items, adjusted earnings from continuing operations remained flat at 54 cents per share. Adjusted earnings for the fourth quarter beat the Zacks Consensus Estimate by 6 cents.
For 2024, AT&T reported a net income of $10.75 billion or $1.49 per share compared with $14.19 billion or $1.97 per share in 2023 owing to higher asset impairment and restructuring charges. Excluding non-recurring items, adjusted earnings for 2024 declined to $2.26 per share from $2.41 in 2023.
Quarter Details
Quarterly GAAP operating revenues increased 0.9% year over year to $32.3 billion, largely due to higher Mobility service and equipment sales and Consumer Wireline revenues partially offset by lower Business Wireline and Mexico revenues. The top line beat the consensus mark of $32.29 billion. For 2024, GAAP operating revenues remained relatively flat at $122.34 billion.
Adjusted operating income decreased to $5.4 billion from $5.8 billion for respective adjusted operating income margins of 16.8% and 18.1%. Adjusted EBITDA improved to $10.8 billion from $10.6 billion.
AT&T witnessed solid subscriber momentum with 839,000 post-paid net additions. This included 482,000 postpaid wireless phone additions. Postpaid churn was 0.85%, while postpaid phone-only average revenue per user (ARPU) increased 1.9% year over year to $56.72 due to improved international roaming, pricing actions and a transition to higher-priced unlimited plans.
Segmental Performance
Communications: Total segment operating revenues were $31.14 billion, up from $30.8 billion, as improvement in the Mobility business (up 3.3% to $23.13 billion) and Consumer Wireline (up 3.4% to $3.46 billion) was partially offset by a decline in Business Wireline (down 10% to $4.54 billion). The segment revenues surpassed our estimates of $30.77 billion.
Service revenues from the Mobility unit improved 3.3% to $23.13 billion, driven by solid subscriber and postpaid ARPU gains, while equipment revenues were up 3.3% year over year to $6.57 billion due to higher volumes of non-phone sales and higher-priced phone sales. Revenues from the Consumer Wireline business were up due to a gain in fiber broadband. AT&T recorded net fiber additions of 307,000, while Internet Air added 158,000 subscribers during the quarter.
Revenues from Business Wireline were down due to lower demand for legacy voice and data services as customers shifted to more advanced IP-based offerings. Total segment operating income declined 6.3% to $6.19 billion, with operating margins of 19.9% (down 160 bps). Adjusted EBITDA was $11.3 billion compared with $11 billion in the year-ago quarter.
Latin America: Total operating revenues were $1.04 billion, down 4.2% year over year, due to lower equipment sales and service revenues. Adjusted EBITDA improved to $171 million from $137 million in the year-ago quarter for respective margins of 16.4% and 12.6%.
Cash Flow & Liquidity
For 2024, AT&T generated $38.77 billion of cash from operations compared with $38.31 billion in 2023. Free cash flow for the quarter was $4.8 billion compared with $6.4 billion in the year-ago quarter. As of Dec. 31, 2024, AT&T had $3.3 billion of cash and cash equivalents with long-term debt of $118.4 billion compared with the respective tallies of $6.7 billion and $127.8 billion in the year-ago period. Net debt to adjusted EBITDA was about 2.68X.
Guidance
While optimizing operations, AT&T is aiming to increase efficiencies to lower operating costs while focusing on 5G and fiber-based connectivity, along with an expanded reach of software-based entertainment platforms. For 2025, AT&T expects wireless service revenues to improve in the range of 2-3%, while broadband revenues are anticipated to grow in the mid-teens.
Adjusted earnings are projected to be between $1.97 and $2.07 per share. Free cash flow in 2025 is expected to be more than $16 billion due to cost savings. The company is also aiming to reduce its debt burden by monetizing non-core assets. AT&T firmly remains on track to pass more than 30 million fiber locations by the end of 2025, with 28.9 million consumer and business locations passed by the end of 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, AT&T has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, AT&T has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
AT&T belongs to the Zacks Wireless National industry. Another stock from the same industry, Verizon Communications (VZ), has gained 8.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2024.
Verizon reported revenues of $35.68 billion in the last reported quarter, representing a year-over-year change of +1.6%. EPS of $1.10 for the same period compares with $1.08 a year ago.
For the current quarter, Verizon is expected to post earnings of $1.14 per share, indicating a change of -0.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.
Verizon has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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