Will Modest Top-Line Improvement Aid AT&T's (T) Q1 Earnings?

AT&T Inc. T is scheduled to report first-quarter 2024 results on Apr 24, before the opening bell. In the last reported quarter, the adjusted earnings missed the Zacks Consensus Estimate by a penny.

The company is expected to have witnessed a top-line improvement year over year on healthy wireless traction, driven by steady investments for 5G expansion and fiber broadband infrastructure development.

Factors at Play

During the quarter, the company launched AT&T Dynamic Defense – the first-and-only network with built-in security controls to thwart cyber-attacks. Embedded within AT&T’s network, it quickly detects cyber threats, filters traffic and executes security controls without the additional cost of installation and equipment. This automated cybersecurity tool allows businesses of all sizes to tailor security policies to fit their specific needs.

In the first quarter, the FirstNet Authority announced plans to invest $6.3 billion through its network contract with AT&T and an additional $2 billion for ongoing investments in coverage enhancements for public safety. These strategic investments will expand and evolve FirstNet to bring public safety to the forefront of innovative, lifesaving technologies. These are likely to have translated into incremental revenues in the upcoming quarter.

During the quarter, AT&T began its network modernization efforts by deploying Ericsson Cloud RAN technology on its commercial 5G network. As part of the live deployment, AT&T and Ericsson have migrated frequency band 3700MHz from C-Band traffic to Cloud RAN infrastructure for a fully open, agile, programmable wireless network.

The Open RAN architecture facilitates healthy competition among vendors for the supply of essential components and reduces dependence on a single manufacturer. It is likely to offer more flexibility, lower costs and help develop novel ideas to monetize the network. These initiatives are likely to have had a favorable impact on the company’s first-quarter performance.

In the first quarter, the company launched AT&T Internet Air for Business. This new fixed wireless service for small, mid-size and large businesses helps to establish a primary Internet connection where fiber is not available in remote locations, or when temporary access is needed. It can also serve as a supplemental Internet connection to distribute workload or as an alternate connection if the primary wired network connection is interrupted.

AT&T also introduced AlertGPS, a discreet, lightweight and wearable device that is easy to use and supported by the highly secure AT&T network. The device empowers home healthcare workers to communicate and request assistance in real-time during a medical emergency. This instant two-way communication streamlines response times and ensures timely intervention in critical situations. These are likely to be reflected in the upcoming quarterly results.

Our estimate for revenues from the Communications segment is pegged at $29,984 million, while that from the Latin America segment is $1,013 million.

However, AT&T is facing stiff competition in the wireless market from other major carriers that are aggressively expanding their networks and improving their offerings. Consumer’s tendency to switch to various streaming services is hurting company’s top line. It also has a large debt burden, which dents its competitiveness and limits growth potential. In addition, a challenging macroeconomic environment, inflationary pressures and business uncertainty are forcing consumers to have a conservative approach to higher-tier services.

The Zacks Consensus Estimate for total revenues is pegged at $30,665 million, indicating an increase from $30,139 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 53 cents per share. It reported earnings of 60 cents per share in the year-earlier quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for AT&T for the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

AT&T Inc. Price and EPS Surprise

AT&T Inc. Price and EPS Surprise

AT&T Inc. price-eps-surprise | AT&T Inc. Quote

Zacks Rank: AT&T has a Zacks Rank #3.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Qualcomm Incorporated QCOM is set to release quarterly numbers on May 1. It has an Earnings ESP of +6.15% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Silicon Motion Technology Corporation SIMO is +5.96% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on May 2.

The Earnings ESP for Meta Platforms, Inc. META is +3.26% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Apr 24.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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.

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