AT&T reported 23Q3 GAAP EPS of $0.48, below last year’s $0.79 and also below my estimate of $0.55. The primary cause of the shortfall vs. my estimate was a $604 million charge for impairments and restructuring that included a $450 million impairment charge against a satellite business in Latin America. Excluding this and other specified items, non-GAAP EPS was $0.64, better than my estimate of $0.59. Free cash flow was $5.2 billion in the quarter, slightly below my estimate of $5.3 billion.
Revenues of $30.4 billion were up 1% YOY. Mobility revenues were up 2%, as growth in subscribers growth and postpaid phone ARPU, more than offset a decline in equipment volumes due to lower device volumes. Mobility operating income increased 8.6% from lower equipment costs and associated selling expenses. Postpaid phone net additions were 468,000 in the quarter.
Business Wireline revenues decreased 7.9% YOY due to lower demand for legacy voice and data services and streamlining of product offerings. Operating income fell 43.6%. Consumer Wireline revenues increased 4.6% YOY as gains in broadband more than offset declines in legacy voice and data services. CW operating income increased 12.7%. Fiber net adds were 296,000 in the quarter. In Latin America, revenues increased 26.4%, due to favorable foreign exchange and higher equipment revenues. Its operating loss narrowed to $29 million from $63 million. Corporate costs increased 2.1%, in line with estimates. Certain significant items (excluded in the calculation of non-GAAP earnings), increased from $204 million to $737 million, including the $650 million of impairments and restructuring costs. Thus, GAAP operating income declined 3.8%.
Management raised its guidance for 2023 adjusted EBITDA growth from greater than 3% to 4.5% or greater. It also now expects free cash flow of at least $16.5 billion vs. previous guidance of $16 billion.
Since my previous report, AT&T’s stock has delivered a total return of 10.7% vs. the S&P 500’s 0.3% loss. With 23Q3 results largely on track, I am maintaining my performance rating of “1” (Buy) and price target of $18.00. The price target equates to 8.2 times projected 2024 GAAP EPS of $2.21 and 7.0 times projected 2024 non-GAAP EPS of $2.58.
This is a summary of my recent update report on AT&T, Inc. (T). To obtain a copy of the full report, please reach out to me using the contact information provided below.
November 21, 2023 (Report originally published on November 16, 2023.)
Stephen P. Percoco
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