AT&T Earnings Tumble but Expectations Are Met - TheStreet

AT&T Earnings Tumble but Expectations Are Met

The company's stock jumped on the news.
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AT&T

(T) - Get Report

announced this morning that third-quarter earnings tumbled, mostly as a result of its integration of

Tele-Communications Inc.

Nevertheless, it marginally beat analyst expectations.

AT&T, which is based in New York, reported operational profits of $1.75 billion, or 54 cents per share on a diluted basis, down 4.5% from $1.84 billion, or 68 cents a share, a year earlier. That figure was just ahead of the

First Call/Thomson Financial

consensus estimate of 53 cents and took into account the company's acquisitions of TCI and parts of the

IBM Global Network

business.

For the third quarter ended Sept. 30, AT&T's net income fell 17.8%, to $1.63 billion, or 50 cents a diluted share, from $1.99 billion, or 73 cents a share a year earlier.

Pro forma revenues increased 5.6%, up to $16.31 billion from $15.44 billion a year ago.

AT&T's stock was up 1 1/4 to 44 1/4 by late morning.

Rex Mitchell, a wireless telecommunications services analyst at

Banc of America Securities

who has a buy rating on the stock, said AT&T's revenues were stronger than expected. The wireless services operation grew 44.2%. That "leads the pack" when it comes to the competition, according to Mitchell. Mitchell hasn't done any recent underwriting for the company.

However, revenue in the business and consumer operations leaves room for improvement. The business operations unit reported an increase in third-quarter revenues of 5% from last year but is actually down a tenth of a percent from the second quarter. Meanwhile, consumer services revenue declined 4.7% from a year earlier and is up only 2% from the second quarter. Those numbers signal a loss of market share to its competitors, such as

Sprint

(FON)

and

MCI Worldcom

(WCOM)

.

Mitchell was cheered by the 13.8% rise in AT&T's operating cash flow, or earnings before interest, taxes, depreciation and amortization.

He maintains a positive outlook on the company and notes that the biggest determinant of the company's future performance will be the entrance of regional Bell operating companies into the long-distance business. That's slated to happen on a state-by-state basis.