Will Communications Segment Buoy AT&T's (T) Q4 Earnings?

AT&T Inc. (NYSE:T) is scheduled to report fourth-quarter 2019 results before the opening bell on Jan 29. For the fourth quarter, the company is likely to have recorded lower revenues due to adverse foreign currency translation despite solid performance of the Wireless business.

Factors at Play

The Communications segment has three business units namely, Mobility, Entertainment Group and Business Wireline.

During the fourth quarter, AT&T introduced 5G technology in certain areas of Detroit and Las Vegas among others, bringing the tally to 19 cities across the country. The company also launched 5G+ services in parts of Baltimore, Cleveland, Detroit and some other select locations during the quarter to increase the reach of such services to 35 cities. This is likely to be reflected in the fourth-quarter results of the Mobility division.

During the quarter, AT&T’s DirecTV channel brought cheers among soccer fans by covering the final stages of FIFA U17 World Cup 2019 in Brazil. At the same time, it offered some exclusive coverage of the 2019/20 season of LaLiga – the top professional football division of the Spanish football league system. This is likely to have augmented revenues of the Entertainment Group division.

During the quarter, AT&T collaborated with Microsoft (NASDAQ:MSFT) during the quarter to introduce 5G and advanced edge computing solutions to select customers in Dallas, TX. The alliance will allow AT&T’s software-defined and virtualized 5G core technology, Network Cloud, to provide low latency for enterprises, bolster core network capabilities, stimulate innovation for customers and empower workforce while minimizing operating costs. The company also inked an agreement with Amdocs Limited to upgrade and modernize the latter’s digital business support system to better analyze data and process low-latency, high-bandwidth applications. This is likely to have boosted the Business Wireline division’s revenues.

Q4 Developments

During the quarter, AT&T inked an agreement to sell its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America in order to reduce its staggering debt burden. The deal is likely to be completed within six to nine months. By the end of 2019, AT&T completed $15 billion worth of non-core asset monetization, including the $4.5-billion sale of a preferred equity interest in a subsidiary that holds cell-tower assets. This exceeded the original target $6-$8 billion worth of non-core asset sale for the year.

Overall Expectations

The Zacks Consensus Estimate for operating income from Mobility, Entertainment Group and Business Wireline is pegged at $5,519 million, $727 million and $1,241 million, respectively, compared with $5,742 million, $1,085 million and $1,209 million reported in the previous quarter. The consensus estimate for EBITDA from Mobility and Entertainment Group stands at $7,625 million and $2,158 million respectively, down from $7,753 million and $2,400 million reported in the year-earlier quarter. The same from Business Wireline is expected to remain flat at $2,482 million compared with the previous quarter.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

The Zacks Consensus Estimate for total revenues for the company is pegged at $46,907 million, indicating a decline of 2.3% from $47,993 million reported in the prior-year quarter due to adverse foreign currency translation from Latin American operations. The consensus mark for earnings is currently pegged at 87 cents per share, up from 86 cents reported in the year-earlier quarter. (Read More: Earnings ESP Filter .