AT&T Posts Earnings Beat on Solid Subscriber Additions

AT&T posts stronger-than-expected fourth quarter earnings and overall revenue as wireless network growth offsets a drop in revenue in its WarnerMedia unit.
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AT&T  (T) - Get Report on Wednesday posted stronger-than-expected fourth-quarter earnings and overall revenue as wireless and broadband network growth offset a drop in revenue in its WarnerMedia unit - even as it took a big charge related to cord-cutting consumers.

AT&T said adjusted earnings for the three months ended in December were 75 cents a share, vs. 89 cents a year earlier. Analysts polled by FactSet had been expecting per-share earnings of 73 cents.

At the same time, AT&T booked a $15.5 billion charge on its pay-TV business, reflecting a shift in consumers away from plugged-in cable and satellite content, including its DirecTV offering.

The write-down resulted in a fourth-quarter loss of $13.89 billion, or $1.95 a share, compared with a profit of $2.39 billion, or 33 cents a share, a year earlier. Revenue slipped 2.4% to $45.69 billion, down from $44.58 billion a year ago.

“We ended the year with strong momentum in our market focus areas of broadband connectivity and software-based entertainment,” CEO John Stankey said in a statement. “By investing in our high-quality wireless customer base, we had our best full-year of postpaid phone net adds."

WarnerMedia revenue fell 9.5% to $8.6 billion as movie production was halted during the pandemic, though that was partially offset by an increase in HBO revenue, AT&T said. HBO revenue rose 11.7% to $1.9 billion reflecting an increase in subscription revenue.

Indeed, subscribers to its HBO Max streaming service hit 61 million worldwide last quarter, a gain that puts it ahead of its 2020 target, while its wireless network added a much stronger-than-expected 800,000 new subscribers who pay a monthly bill.

The release of Wonder Woman 1984 also helped drive domestic HBO Max and HBO subscribers to more than 41 million, two years ahead of the company's initial forecast, Stankey said.

For 2021, AT&T said it expects adjusted per-share earnings to be "stable," with consolidated revenue growth "in the 1% range" and gross capital investment "in the $21 billion range." Capital expenditures are expected in the $18 billion range, it said.

Free cash flow is expected to ring in around $26 billion, with a full-year total dividend payout ratio "in the high 50’s range," AT&T said.

Shares of AT&T were down 1.41% at $29.33 in trading on Wednesday.