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AT&T Misses Earnings Profit Estimate, Holds Dividend

AT&T added 163,000 new phone subscribers over the first quarter, a better-than-expected gain that boosted cash flow and offset a 5 cents per share coronavirus earnings hit.

AT&T Inc.  (T) - Get AT&T Inc. Report posted modestly weaker-than-expected expected first quarter earnings Wednesday, and pulled its full-year profit guidance, as the global coronavirus pandemic clipped its bottom line.  

AT&T said adjusted earnings for the three months ending in March were pegged at 84 cents per share, down 2.3% from the same period last year and one penny shy of the Street consensus forecast. AT&T salso said that the coronavirus pandemic took 5 cents from its adjusted earnings total. Group revenues, AT&T said, fell 4.5% to $42.78 billion and again missed analysts' estimates of a $44.15 billion tally.

Looking into the 2020 financial year, AT&T said that the uncertainty linked to the ongoing coronavirus pandemic forced it to withdraw its profit guidance, which has forecast, which had previously forecast adjusted earnings to grow to between $4.50 to $4.80 per share by 2022 and a compound annual growth rate in revenues of between 1% to 3% over the next three years.

The group did, however, maintain its quarterly dividend and reiterate that its cash flow will remain strong enough to service its $160 billion in debt.

“The COVID pandemic had a 5 cents per share impact on our first quarter Without it, the quarter was about what we expected — strong wireless numbers that covered the HBO Max investment, and produced stable EBITDA and EBITDA margins,” said CEO Randall Stephenson.

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“We have a strong cash position, a strong balance sheet, and our core businesses are solid and continue to generate good free cash flow — even in today’s environment," he added. "In light of the pandemic’s economic impact, we’ve already adjusted our capital allocation plans and suspended all share retirements. As a result, we’re able to continue investing in critical growth areas like 5G, broadband and HBO Max, while maintaining our dividend commitment and paying down debt.”

AT&T shares were marked 1.5% lower in Wednesday trading following the earnings release to change hands at $29.38 each, a move that would trim the stock's year-to-date decline to around 24%. 

AT&T also said it added 163,000 new monthly phone subscribers over the first quarter, a better-than-expected gain that boosted cash flow and topped the Refinitiv forecast of a 90,700 gain.

Earlier this week, AT&T said it plans to launch its HBO Max streaming service on May 27, and offer it free to customers with the DirecTV Premier package and those with the group's Internet 1000 plan.

HBO Max is expected to cost around $15 a month for most customers, however, a price point that is marginally higher than the $12.99 charge for Walt Disney's  (DIS) - Get The Walt Disney Company Report Disney+ offering and streaming leader Netflix's  (NFLX) - Get Netflix Inc. Report standard service. 

"AT&T reported weak performance at WarnerMedia and sustained levels of video subscriber losses," said Oppenheimer analyst Timothy Horan, who carries an outperform rating on the stock with a $47.00 price target. "However, service revenues and broadband results were solid. We believe the company has ample ability to control expenses through this economic turmoil and see the dividend as safe."