AT&T missed on both earnings and revenue estimates for the first quarter of 2020, and blamed the coronavirus pandemic for year-over-year declines.
Wall Street had forecast earnings per share (EPS) of 85 cents on $44.21 billion in revenue, according to an analyst consensus compiled by Yahoo Finance. The WarnerMedia parent company actually reported adjusted EPS of 84 cents on $42.8 billion of revenue on Wednesday, which is down two pennies per share and a few billion dollars in revenue from Q1 2019.
Without impact from COVID-19, AT&T says it would have reported adjusted Q1 EPS of 89 cents. Still, the company’s net income rose to $4.6 billion from 2019’s $4.1 billion.
Communications, the largest part of AT&T’s business, saw revenues decrease. While the mobile unit ticked up a bit, revenues for what AT&T refers to as its “entertainment” segment (they’re talking about cable and satellite TV, etc., which is not to be confused with WarnerMedia) declined 7.2% from the comparable quarter due to continued cord-cutting.
Over the first quarter of 2020, AT&T says it lost 897,000 subscribers across DirecTV, U-verse and AT&T TV and is now reporting a total of 18.6 million total customers through those services. Fortunately for AT&T, content costs also decreased.
At WarnerMedia, as expected, a lack of March Madness on TBS really hurt. HBO revenue was also down, but not nearly as dramatically as Turner’s -8.2% decline.
Like Turner, the Warner Bros. studio revenue was also down $3.2 billion (-7.9%) year to year. Stalled TV production due to the coronavirus was felt there, as was an unfavorable comparison to some “Aquaman” ticket sales in the first quarter of 2019.
“The COVID pandemic had a 5 cents per share impact on our first quarter. Without it, the quarter was about what we expected — strong wireless numbers that covered the HBO Max investment, and produced stable EBITDA and EBITDA margins,” Randall Stephenson, AT&T chairman and CEO, said in a prepared statement accompanying the financial results.
“We have a strong cash position, a strong balance sheet, and our core businesses are solid and continue to generate good free cash flow — even in today’s environment. In light of the pandemic’s economic impact, we’ve already adjusted our capital allocation plans and suspended all share retirements,” Stephenson said. “As a result, we’re able to continue investing in critical growth areas like 5G, broadband and HBO Max, while maintaining our dividend commitment and paying down debt.”
Shares of AT&T stock (T) closed Tuesday at $29.87. The U.S. stock markets reopen for their regular trading day at 9:30 a.m. ET.
AT&T’s first-quarter results were reported on the heels of WarnerMedia’s Tuesday announcement that its long-awaited streaming service HBO Max will launch May 27 and the reveal of the lineup of original titles that will debut with the platform, which readers can find here.
HBO Max will cost $14.99 a month, the same price as an HBO-only subscription. The price makes HBO Max among the most expensive streaming services, when compared to Netflix, Hulu and fellow newcomers like Peacock, Quibi, Apple TV+ and Disney+.
WarnerMedia’s SVOD will be free of charge to AT&T and Charter customers who already subscribe to HBO either through a pay-TV subscription or digital via HBO Now. Those who subscribe to AT&T’s highest-tier wireless, video and internet plans will also have HBO Max included. Additionally, all other AT&T customers will get anywhere between one and 12 months free, depending on their plan.
AT&T executives will host a conference call at 8:30 a.m. ET to discuss the quarter in greater detail.