AT&T's (T) Q3 Results To Be Dampened By Natural Disasters

U.S. telecom behemoth AT&T Inc. (NYSE:T) yesterday announced that its third-quarter 2017 financial results will be hurt by recent natural calamities such as the multiple hurricanes that hit the U.S. coasts and a devastating earthquake in Mexico. Notably, the company will come up with its third-quarter 2017 results on Oct. 24, after the closing bell.

Management stated that the company’s consolidated revenues in the third-quarter will be affected by $90 million ($210 million pre-tax). Consequently, earnings per share (EPS) will hurt by 2 cents. AT&T also said that it has lost about 90,000 U.S. video subscribers in the quarter because of intense competition in traditional pay TV markets as well as the impact of the recent hurricanes. Subscriber reduction is likely to continue in the fourth quarter as the company is yet to fully restore its operations which were destroyed by natural calamities.

Nevertheless, AT&T has reconfirmed its 2017 financial outlook. In January, management projected that its consolidated revenues will grow in low-single digit in 2017. Adjusted EPS growth will be in the mid-single digit range. Adjusted operating margin will expand in 2017. Full-year capital expenditures and free cash flow will be approximately $22 billion and $18 billion, respectively.

AT&T operates in fiercely competitive U.S. telecom market, which is characterised by cut-throat pricing competition. Its closest rivals, Verizon Communications Inc. (NYSE:VZ) , T-Mobile US Inc. (NYSE:T) and Sprint Corp. (NYSE:S) are offering various unlimited data plans to their customers to remain competitive.

Moreover, AT&T’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by cable companies. These are weighing on the company’s revenues and margins.

However, in sync with the ongoing consolidation trend between the telecom and media sectors, AT&T has agreed to acquire media giant Time Warner Inc. (NYSE:TWX) in an $85.4 billion cash-and-stock deal. If the proposed merger finally goes through, the combined entity will become a major player in the consolidated telecom-media space.

Price Performance of AT&T

AT&T’s shares have increased 3.69%, outperforming the industry’s gain of 2.47% over the past 90 days. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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