- Analysts estimate adjusted EPS of $0.79 vs. $0.76 in Q3 FY 2020.
- The number of new postpaid phone subscribers is expected to be sharply lower than in the year-ago quarter.
- Revenue is expected to fall modestly as the company divests assets and focuses on its core telecom business.
AT&T Inc. ( T ) is undergoing a dramatic realignment as the company spins off its WarnerMedia assets, which are to be formally merged with Discovery Inc. in mid-2022. Simultaneously, the company is refocusing on its core telecom business and preparing a major marketing campaign to promote its new 5G wireless service. AT&T’s new strategy means it must compete in a saturated market against powerful rivals such as T-Mobile US Inc. ( TMUS ) and Verizon Communications Inc. ( VZ ).
Investors will watch closely how AT&T is faring amid this seismic transition when the company reports earnings on Oct. 21 for Q3 FY 2021. For the quarter, analysts estimate modest year-over-year (YOY) growth in adjusted earnings per share (EPS) and a small decline YOY in revenue.
Investors will also be watching another key AT&T metric: the number of additional postpaid phone subscribers, which represents the number of new postpaid phone subscriptions less the number of canceled subscriptions. Analysts estimate that the number of postpaid subscriptions will plunge compared to the same quarter a year ago.
Shares of AT&T have significantly underperformed the broader market in the past year. Save for brief spikes in December 2020 and May 2021, AT&T’s stock has generally traded sideways during much of that time. The stock drifted downward starting in mid-May 2021, then pulled back sharply in the the first half of October. As of Oct. 17, AT&T shares have provided a 1-year trailing total return of just 0.6%, far behind the 28.4% total return of the S&P 500.
AT&T Earnings History
AT&T has had a major problem in posting sustained, strong earnings growth since FY 2018, which was a relatively strong year: quarterly adjusted EPS rose as high as 23.2% and full-year EPS rose 15.4%. By contrast, EPS growth was anemic during every quarter in FY 2019, and in 2020 it declined in all four quarters. The steepest was a 19.5% drop in Q3. AT&T’s profits have risen thus far in 2021, but those gains have been negligible to modest. The company reported adjusted EPS growth of just 1.9% and 6.8% YOY for Q1 and Q2 FY 2021, respectively. Analysts now predict a similarly modest increase of 3.6% in Q3 FY 2021.
AT&T’s quarterly revenue also has struggled to post consistent gains, declining YOY for 6 of the 8 most recent quarters. Like adjusted EPS, AT&T’s revenue climbed modestly YOY in the first two quarters of FY 2021, including growth of 7.6% YOY in Q2. However, analysts expect this trend to reverse in Q3 FY 2021, with revenue declining by 2.8%. That would be the third Q3 period in a row in which revenue declined.
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