By Joe Musso
AT&T Inc. (T) shares came under pressure Thursday after the telecom giant unsettled investors by reporting third quarter results that fell slightly short of analyst expectations.
Net income fell 21.1 percent to $3.0 billion, or $0.58 per diluted share, from $3.8 billion, or $0.72 per diluted share in the year ago period. Both quarter’s numbers were skewed by individual company expenses. Excluding these one-time costs the company reported an adjusted earnings per share of 63 cents, a penny short of analyst expectations and three cents down from the year ago quarter’s 66 cents.
The profit downturn came even though the Dallas based company’s revenues did increased 2.5 percent to $33.0 billion from $32.2 billion this time last year. Despite the surge, AT&T’s reported revenues fell just short of the analyst estimate average of $33.2 billion.
“These are solid results in a challenging environment,” said AT&T Inc. Chief Financial Officer John Stephens, who also noted the lack of exclusive Apple product sales. “We saw competitive intensity pick up in an iPhone launch quarter with all major carriers now offering the iPhone.”
Due to the heightened competitive landscape, AT&T launched a variety or promotions last quarter, including a revised equipment financing plan and a “bring your own device” option. During Wednesday’s earning conference call AT&T reported that more than 400 thousand customers opted to purchase their devices elsewhere and bring them into AT&T rather than purchasing their new device from the wireless provider.
“While those 400-thousand plus BYOD devices really don’t bring us much if anything in revenue, they don’t bring us any expenses either,” Stephens said. “We’ll take those every time we can get them.”
The underwhelming results that AT&T released after market close Wednesday got a chilly reception on Wall Street: In late-morning New York Stock Exchange trading the company’s shares were down 90 cents, or 2.6 percent, at $33.60.
AT&T Inc. did report 2 million new wireless subscribers over the last quarter, the majority of which came from non-cellular phone services such as AT&T U-verse cable. This coupled with $3.5 billion in free cash flow suggests that AT&T is still a growing company. The stock’s one-year target estimate sits at $36.00, about $2.50 higher than the current stock price.