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Key Takeaways

  • AT&T’s subscriber growth likely moderated in the fourth quarter, slicing into revenue and earnings.
  • Investors, though, pushed AT&T’s stock up 22% in the latest quarter, easily outperforming the broader telecommunications sector.
  • AT&T subscriber growth continues benefiting from HBO Max’s popularity.

Fourth-quarter earnings at AT&T Inc. (T), the telecommunications firm that traces its lineage to telephone inventor Alexander Graham Bell, probably fell by a fifth, concluding a year in which its still robust subscriber growth moderated while its stock defied broader market losses.

Net income at AT&T, now focused on wireless and broadband services, fell a projected 21% to $4 billion, or 56 cents per share, according to estimates from Visible Alpha. Revenue probably dropped 23% to $31.4 billion. In the same period a year ago, the company earned $5 billion, or 78 cents a share, on revenue of $41 billion.

AT&T Key Stats
  Q4 2022 (est.) Q4 2021 Q4 2020
 Adjusted EPS $0.56 $0.78 $0.75
 Revenue $31.4B $41.0B $45.7B
Net wireless subscriber gain/(loss) (27.8%) 4.6% 810.4%

Source: Visible Alpha

AT&T’s declining subscriber growth partly reflects a leveling off from the explosive growth it experienced during the onset of the pandemic, when the company began rolling out 5G services and launched HBO Max as its new streaming service. Since then, AT&T has spun off its WarnerMedia unit, including HBO Max, but retains the ability to bundle the service in offerings to wireless customers.”

AT&T’s stock surged 22% in the fourth quarter and 6% for all 2022, defying broader global financial market distress. In an uncertain economic environment, the company’s annual dividend yield—at 5.8%, it’s the 10th-highest in the S&P 500 Index—remains a key feature for investors. By comparison, the broader S&P 500 Telecommunications Services Index fell 2% in the fourth quarter, ending a dismal year in which it plunged 40% (see chart below).

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Max Benefits From HBO Streaming

In the quarter, Visible Alpha estimates AT&T added 927,000 subscribers on a net basis, down from 1.3 million in the fourth quarter of 2021. Prior to the launch of HBO Max in mid-2020, though, the company had lost subscribers in five of its eight previous financial quarters. Since the launch, net subscriber gains have exceeded 800,000 in every quarter, easily surpassing growth at rival Verizon (VZ).

Even with the subscriber gains, AT&T’s revenue has failed to return to pre-pandemic levels, when its quarterly sales routinely reached the mid-$40 billion range. The fourth quarter likely will mark the sixth consecutive in which revenue declined at least 5% from the same period in the prior year, and the company has increased revenue in just two quarters dating to mid-2019.

At the same time, though, the company has dramatically cut costs. Spinning off WarnerMedia helped reduce debt, and fourth-quarter operating expenses likely fell 25%, according to Visible Alpha.

Those cuts and the company’s relatively solid subscriber momentum, particularly compared with Verizon, should help its stock perform well amid turbulent economic and financial market conditions, Goldman Sachs said in a recent research report.

“We believe AT&T is better positioned financially and strategically (than Verizon) and that the stock should sustain a premium, as it is not only exhibiting meaningfully faster wireless growth but looks better positioned to report growing EPS (earnings per share) and better dividend coverage,” the Goldman Sachs report said.

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