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AT&T Stock Jumps After Q3 Earnings Beat, HBO Subscriber Boost

AT&T topped Wall Street's third quarter earnings forecast Thursday, thanks to robust gains in its HBO streaming service and the addition of more than 900,000 new post-paid wireless customers.

AT&T  (T) - Get AT&T Inc. Report posted stronger-than-expected second-quarter earnings Thursday, thanks in part to impressive subscriber gains for its HBO streaming service, as it continues its transition from media assets to a 'pure play' telecom.

AT&T said adjusted earnings for the three months ending in September were pegged at 87cents per share, up 14.4% from the same period last year and 9 cents ahead of the Street consensus forecast. Group revenues, the company said, fell 5.8% to $39.9 billion, a figure that came in just ahead of analysts' estimates of a $39.377 billion tally. 

AT&T said it added 12.5 million global subscribers to its HBO and HBO Max streaming services, an expects its global base to rise to between 70 million and 73 million by the end of the year, as it continues to challenge its larger rival Netflix  (NFLX) - Get Netflix, Inc. (NFLX) Report for new additions.

The group also added 928,000 post-paid wireless subscribers and 289,000 new broadband customers. 

Looking into the final months of the year, AT&T said it sees adjusted earnings at the "high end" of a "low-to-mid-single digit" growth range, adding its on track to meet its free cash flow target of $26 billion.

“We continue to execute well in growing customer relationships, and we’re on track to meet our guidance for the year,” said CEO John Stankey. “We had our best postpaid phone net add quarter in more than 10 years, our fiber broadband net adds increased sequentially, and HBO Max global subscribers neared 70 million."

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"We also have clear line of sight on reaching the halfway mark by the end of the year of our $6 billion cost-savings goal,” he added.  

AT&T shares were marked 1.24% in early trading immediately following the earnings release to change hands at $26.20 each.

Earlier this month, AT&T shares slumped to the lowest level in more than a decade as investors re-priced the group's shift in focus from media assets to telecoms while adjusting to lower payout ratios.

AT&T has shed key assets, including DirecTV, from its balance sheet and planned the $43 billion merger of its media division with Discovery DISCA in a move towards its goal of becoming a so-called 'pure play' telecoms group that leverages off of 5G network growth.

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While reducing debt and boosting free-cash flow prospects, the moves have come at a cost to shareholders, with AT&T noting this spring that its dividend payout ratio, which was around 63% in the first quarter, will be "re-sized" to account for the distribution of WarnerMedia assets into a new company.

The remaining AT&T assets will aim to give shareholders a dividend payout ratio of between 40% and 43%, the company said, based on anticipated free cash flow of around $20 billion, the company said.