AT&T Beats Q4 Earnings Forecast, Books HBO Max-Related Revenue Hit

AT&T said investments linked to it HBO Max launch clipped fourth quarter revenues, but it still posted stronger-than-expected earnings and confirmed its 2020 profit guidance.

AT&T Inc.  (T) - Get Report posted stronger-than-expected fourth quarter earnings Wednesday, and reaffirmed its full-year profit guidance, as it prepares for its launch of its HBO Max streaming service later this year.

AT&T said adjusted earnings for the three months ending in December came in at 89 cents per share, up 3.5% from the same period last year and 2 cents head of the Street consensus forecast. Group revenues, AT&T said, fell 2.4% to $46.8 billion, a figure that fell just shy of analysts' estimates of a $47 billion tally thanks in part to costs related to the HBO Max launch. 

Looking into the near-term AT&T said it sees adjusted earnings to grow to between $4.50 to $4.80 per share by 2022, with revenue growth every year and a compound annual growth rate in revenues of between 1% to 3% over the next three years. 

“We delivered what we promised in 2019 and we begin this year with strong momentum in wireless, with HBO Max set to launch in May and our share retirement plan well underway,” said CEO Randall Stephenson. “Our 2020 outlook positions us to deliver meaningful progress on our 3-year financial and capital allocation plans as we continue to invest in growth opportunities and create value for our owners, as we did last year.”  

AT&T shares were marked 3.24% lower in Wednesday trading following the earnings release to change hands at $37.26 each. trimming its six-month gain to around 10%.

The group's entertainment division, which houses DirecTV, saw revenues fall 6.1% to $11.23 billion, as viewers continue to shift to a-la-carte streaming services from media-sector rivals such as Netflix  (NFLX) - Get Report, Disney  (DIS) - Get Report and Amazon  (AMZN) - Get Report. Around 945,000 of AT&T's 'premium' subscribers were lost over the fourth quarter, the company said, although 229,000 were added to its wireless network. 

AT&T's WarnerMedia division fell 3% to $8.92 billion. 

"In terms of (key performance indicators), Mobility postpaid phone subscribers were above consensus while churn increased year-on-year, which is highlighting a more competitive environment. Premium video subscriber losses were worse than expected with AT&T losing 1.164 million customers vs. consensus of 944,000," said KeyBanc Capital Markets analyst Brandon Nispel. 

"Broadband subscribers were also well below expectations and AT&T took a $1.3 billion charge during the quarter to write off certain copper facilities,  which to us suggest it is getting ready to shut down U-Verse," he added.