AT&T Exceeds Full-Year 2016 Guidance

An image of a quarterly report on a screen Credit: Shutterstock photo

On Jan. 25, 2017, AT&T Inc. ( T ) reported consolidated revenues of $163.8 billion, operating income of $24.3 billion, net income of $13 billion and adjusted earnings per share of $2.84 for full-year 2016. As the company had strong customer growth during 2016, AT&T outperformed its full-year 2016 guidance.

Brief summary of earnings report

During fourth-quarter 2016, Dallas-based AT&T reported consolidated revenues of $41.8 billion, operating income of $4.2 billion and net income of $2.4 billion. On an adjusted basis, the telecom company reported earnings per share of 66 cents, about three cents higher than fourth-quarter 2015 adjusted earnings. The company increased its free cash flow to $3.7 billion, up 19.2% from the prior-year quarter.

Even though the company's fourth-quarter 2016 results underperformed fourth-quarter 2015 results, AT&T outperformed its guidance for full-year 2016 as mentioned in the fourth-quarter 2015 earnings report. For full-year 2016, AT&T's consolidated revenues and adjusted earnings per share increased 11.6% and 4.8% respectively. The company's full-year free cash flow increased $1 billion despite net income based on generally accepted accounting principles decreasing 2.8% from full-year 2015.

CEO Randall Stephenson praised the company's solid performance in 2016, a "transformation year" for AT&T. The company strives to become the "global leader in telecom, media and technology" in the upcoming years.

Company announces Time Warner merger after DIRECTV and wireless success

AT&T's board of directors continued progressing toward their goal of transforming the company into a global leader by launching DIRECT NOW, an innovative "over-the-top" streaming service. On Oct. 22, 2016, the telecom company announced a stock-and-cash merger with Time Warner Inc. ( TWX ), a global leader in media and entertainment. Stephenson expects the Time Warner merger to "bring together world-class content with best-in-class distribution," which leads to higher innovation and customer options.

The telecom company's merger with DIRECTV contributed to solid full-year 2016 performance, with over 235,000 U.S. DIRECTV satellite net adds with stable linear TV subscriber base. AT&T had 9.5 million wireless Internet net adds in the U.S. and Mexico, with 2.8 million during fourth-quarter 2016. These net adds contributed to solid wireless operating margin of 24.7% and top fourth-quarter service EBITDA margin of 45.4%.

Company has good financial outlook for 2017

Despite a modest financial strength rank of 4, AT&T has a profitability rank of 8 and a Piotroski F-score of 7, both suggesting good business operations and high profitability. The company also has expanding operation margins and consistent per-share revenue growth, outperforming 76% and 64% of global telecom services companies respectively.

For 2017, the company expects single-digit consolidated revenue growth, adjusted EPS growth and adjusted operating margin expansion. AT&T also expects full-year 2017 free cash flow to reach $18 billion, about $1.1 billion higher than full-year 2016 free cash flow. As the company reported solid earnings and a positive outlook, AT&T's stock price closed at $41.39 per share on Jan. 25, about 50 cents higher than the share price one week ago.

Disclosure: No postion in AT&T or Time Warner Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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