Markets
CTL

Will AT&T's (T) Earnings Disappoint Estimates this Season? - Analyst Blog

Leading telecom company AT&T, Inc.T is scheduled to release its first-quarter 2015 financial numbers after the closing bell on Apr 22, 2015.

In the last reported quarter, the company's earnings were in line with the Zacks Consensus Estimate. Let's see how things are shaping up prior to this announcement.

Factors Likely to Influence this Quarter

We believe that intensified pricing competition, new device financing plans and other promotional strategies might hamper the company's earnings in the first quarter of 2015. Smaller wireless carriers also offer cost effective voice and data plans. This may hamper AT&T's high-end handset sales and challenge subscriber retention. Additionally, investments in both Project VIP and Agile along with the company's shift from the subsidy model to wireless will continue to put margins under pressure.

On the bright side, management expects business trends to improve further in the Wireline segment. In the coming months, Wireline growth will likely be driven by strong business revenues and enhanced strategic services. Consistent subscriber growth in the U-verse segment is expected to continue going forward, leading to higher revenues. As of Dec 31, 2014, U-verse contributed more than $15 billion in annualized revenues, reflecting 21.9% growth year over year and nearly two-thirds of the company's total consumer revenue.

Earnings Whispers?

Our proven model does not conclusively show that AT&T is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: AT&T has a negative Zacks ESP of -1.59%. This is because the Most Accurate estimate stands at 62 cents while the Zacks Consensus Estimate is pegged higher at 63 cents.

Zacks Rank : AT&T carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.

On the other hand, we caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

BCE Inc. BCE has an earnings ESP of +1.61% and a Zacks Rank #3.

Sprint Corporation S has an earnings ESP of +66.67% and a Zacks Rank #3.

CenturyLink, Inc. CTL has an earnings ESP of +1.70% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AT&T INC (T): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

CENTURYLINK INC (CTL): Free Stock Analysis Report

BCE INC (BCE): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

CTL BCE T

Other Topics

Earnings Stocks

Latest Markets Videos