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Will Communications Segment Buoy AT&T's (T) Q1 Earnings?

AT&T Inc. T is scheduled to report first-quarter 2020 results before the opening bell on Apr 22. In the first quarter, the company is expected to have recorded lower aggregate revenues year over year due to adverse impacts from the coronavirus pandemic, foreign currency and additional investments for new content production in HBO Max.

Factors at Play

The Communications segment has three business units — Mobility, Entertainment Group and Business Wireline. During the quarter under review, AT&T expanded its 5G network infrastructure in various markets to take the tally to 100 cities across the country. The company also launched 5G+ services in other select locations during the quarter to increase its reach to 35 cities. These initiatives are likely to get reflected in the upcoming quarterly announcement.

AT&T collaborated with Google Cloud to facilitate diverse businesses to harness edge connections and edge-computing capabilities. Powered by the company’s wide network coverage, the edge computing solutions will leverage Google Cloud's core capabilities in Kubernetes, AI, ML, data and analytics to offer a flexible tool to better analyze data and process low-latency, high-bandwidth applications. Such technology collaborations are likely to have translated into higher revenues in the Business Wireline division.

The Zacks Consensus Estimate for operating income from Mobility, Entertainment Group and Business Wireline is pegged at $5,437 million, $1,262 million and $1,197 million, respectively, compared with $5,351 million, $1,478 million and $1,223 million reported in the year-ago quarter. The consensus estimate for EBITDA from Mobility is pegged at $7,450 million, which calls for a rise from $7,386 million reported in the year-ago quarter. The same for Entertainment Group is at $2,554 million, which suggests a fall from $2,801 million posted in the year-earlier quarter. Business Wireline’s EBITDA is expected to be $2,418 million, which indicates a decline from $2,458 million reported in the prior-year quarter.

For the March quarter, the Zacks Consensus Estimate for total revenues is at $44,271 million that indicates a decline of 1.2% from $44,827 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 85 cents per share that calls for a fall from 86 cents reported in the year-ago quarter. (Read More: Will Adverse Coronavirus Impacts Dent AT&T Q1 Earnings?)

Earnings Whispers

Our proven model does not predict an earnings beat for AT&T for the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This, however, is not the case here

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -3.83% with the former being pegged at 81 cents and the latter at 85 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

AT&T Inc. Price and EPS Surprise

 

 

Zacks Rank: AT&T currently has a Zacks Rank #3.

Stocks to Consider

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ardagh Group S.A. ARD is slated to release quarterly results on Apr 23. It has an Earnings ESP of +8.20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Eli Lilly and Company LLY is scheduled to release results on Apr 23. The company has an Earnings ESP of +1.67% and carries a Zacks Rank #2.

Citrix Systems, Inc. CTXS has an Earnings ESP of +1.58% and carries a Zacks Rank of 2. The company is set to report results on Apr 23.

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AT&T Inc. (T): Free Stock Analysis Report
 
Citrix Systems, Inc. (CTXS): Free Stock Analysis Report
 
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