AT&T Tops Q3 Earnings Forecasts Despite Loss of Nearly 1.2 Million Premium TV Subscribers

Company shares three-year plan, which includes Randall Stephenson as CEO through at least 2020

Last Updated: October 28, 2019 @ 7:09 AM

AT&T on Monday reported mixed financial results from the third quarter of 2019. The Warner Bros. owner edged out media analysts’ earnings-per-share estimates, but fell shy on revenue.

Overall, AT&T’s entertainment group reported a net loss of a sizable 1.163 million subscribers in Q3. AT&T Now lost 195,000 subscriptions. Carriage disputes didn’t help the former Ma Bell.

Wall Street had forecast earnings per share of 93 cents on $45 billion in revenue, according to a consensus compiled by Yahoo Finance. AT&T reported adjusted earnings per share of 94 cents on $44.6 billion in revenue.

HBO revenues increased 10.6% in the 90-day period ending Sept. 30, and the network home of “Game of Thrones” (pictured above) and “Succession” saw its operating income rise 13.7%.

Much of AT&T’s Q3 disclosure was dedicated to outlining a three-year plan, a response to activist investor Elliott Management Corporation’s recent criticism of the new WarnerMedia parent’s “long-term underperformance.”

Part of AT&T’s three-year plan is the expectation that Randall Stephenson will remain CEO “through at least 2020,” AT&T wrote in the Monday report.

Another key piece is that the company says it will stay “disciplined” in its portfolio review and plans “no major acquisitions.” On Sunday, AT&T said it was going to sell its majority stake in Central European Media Enterprises for $1.1 billion to pay down debt.

“The strategic investments we’ve made over the last several years have given us the essential elements to meet growing demand for content and connectivity,” AT&T Chairman and CEO Stephenson said in prepared remarks. “Our 3-year plan delivers both substantial and consistent financial improvements over the next 3 years. We grow revenues, EBITDA and EPS every single year, and free cash flow is stable next year, but then grows in both of the next two years, as well. And all of this is inclusive of our investment in HBO Max.”

“The objectives we have outlined today have been central to our plans for many months, even before we closed our acquisition of Time Warner. But, as you would expect, our thinking has also benefited from our engagement with our owners, including Elliott Management,” he added. “I’ve found our engagement with Elliott to be constructive and helpful, and I look forward to continuing those conservations. These are smart people who very much appreciate the opportunity we have to create tremendous shareholder value.”

Elliott is happy with AT&T’s response. Here’s that the asset manager had to say this morning:

We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies. We have worked closely and collaboratively with management and the Board on the initiatives announced today. It is clear to us that AT&T is committed to and accountable for creating shareholder value over the near- and long-term.

We have closely evaluated the company’s three-year plan and support the steps toward a faster-growing, more profitable, focused and shareholder-friendly company. The combination of AT&T’s improving business performance, consistent and faster revenue growth, significant margin expansion and enhanced capital return will generate meaningful earnings and cash flow growth over the next three years. In addition, AT&T will continue to refresh its Board as it executes on its plan to realize the $4.50 – $4.80 of EPS by 2022, a figure that is readily achievable and one which excludes the benefit of any portfolio actions. Altogether, we are confident this will yield significant share price upside at AT&T.

We thank Randall, Matt and the rest of the team for their constructive collaboration and leadership, and we are looking forward to close, ongoing engagement as the Company executes on these strategic, operational and portfolio initiatives.

AT&T stock (T) closed Friday at $36.91 per share. The U.S. stock markets reopen this morning at 9:30 a.m. ET.

In premarket trading, AT&T stock is currently up almost 2%.

Stephenson and his fellow executives will host a conference call at 8:30 a.m. ET to discuss the quarter — and the three-year plan — in greater detail.