AT&T Inc (T) shares are experiencing a slight decline, down roughly 1% to $21.55 on Tuesday, as investors anticipate the company’s upcoming third-quarter earnings report, scheduled for release Wednesday before the market opens. Analyst consensus estimates for the third quarter predict AT&T will report earnings per share (EPS) of 57 cents on revenue of $30.44 billion.
Investors will be closely watching to see if AT&T can deliver on its full-year guidance, which includes wireless service revenue growth in the 3% range and broadband revenue growth exceeding 7%. In its second-quarter earnings release, the company reaffirmed its expectations for adjusted EPS between $2.15 and $2.25 for the year, along with free cash flow in the range of $17 billion to $18 billion.
The second quarter saw AT&T report operating revenues of $29.8 billion, a marginal year-over-year decrease of 0.4%, narrowly missing analyst expectations of $29.9 billion. Despite this revenue shortfall, the company’s adjusted EPS of 57 cents aligned with estimates, providing stability for investors and leading to a post-earnings stock price gain.
AT&T’s Mobility segment, a consistent growth engine for the company, added 997,000 wireless net subscribers in the second quarter, exceeding estimates significantly. This included 419,000 postpaid phone net additions, surpassing analyst expectations of 279,000. The telecom giant’s strategy to target budget-conscious consumers appears to be yielding positive results, as postpaid churn improved to 0.85%, down from 0.95% a year ago.
In the Consumer Wireline segment, AT&T’s fiber broadband performance presented a mixed bag for the second quarter. The company added 239,000 AT&T Fiber subscribers, falling short of analyst estimates of 253,000. However, AT&T’s Internet Air service saw a more promising development, attracting 139,000 net additions, further bolstering the company’s broadband expansion efforts.
In terms of profitability, AT&T’s adjusted EBITDA rose to $11.3 billion from $11.1 billion a year ago, indicating slight growth in operating performance. The Mobility segment’s operating income increased by 1.6% year-over-year to $6.72 billion, with an operating margin of 32.8%, up from 32.6% in the same period last year.
AT&T’s commitment to network expansion, particularly in 5G and fiber infrastructure, is evident in its capital expenditure of $4.4 billion in the second quarter. The company generated $9.1 billion in operating cash flow, a slight decrease from the $9.9 billion recorded a year ago. However, free cash flow improved to $4.6 billion from $4.2 billion in the prior year, thanks to careful expense management. This enhancement in free cash flow is particularly significant considering the company’s attractive 6.10% dividend yield, which remains a key draw for income-focused investors.
As AT&T prepares to release its third-quarter results, key questions for investors will focus on the company’s ability to maintain subscriber growth in its Mobility segment, address the ongoing challenges within the Business Wireline division, and continue its push to expand fiber broadband coverage. Shareholder returns, supported by robust free cash flow, will also remain a focal point, as AT&T balances its investment in network capabilities with maintaining its attractive dividend yield.