Deals @ Amazon:
For Immediate Release
Chicago, IL – April 23, 2012 – Zacks.com announces the list of
stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include
ATT Inc.
(
T
),
Apple Inc.
(
AAPL
),
Google Inc.
(
GOOG
),
Verizon Communications Inc.
(
VZ
) and
Sprint Nextel Corp.
(
S
).
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free Profit from the Pros newsletter:
http://at.zacks.com/?id=5513
Here are highlights from Friday’s Analyst Blog:
Earnings Preview: ATT
The second-largest U.S. mobile service provider
ATT Inc.
(
T
) is slated to release its first quarter 2012 earnings on April 24,
before the opening bell. The current Zacks Consensus Estimate for
the first quarter is 57 cents, representing a year-over-year
increase of 0.37%.
Looking at surprises, ATT had average negative surprise of
0.32% in the trailing four quarters. In the year-earlier quarter,
the company did not surprise us by reporting in line earnings with
our expectation.
At the fourth quarter 2011 conference call, ATT provided
guidance for fiscal 2012. The company projected consolidated
revenue, including post-paid ARPU, to grow 2% year over year.
ATT also guided consolidated margin to expand further on
increasing wireless margins and stable wireline margin.
Accordingly, earnings per share would increase in the mid
single-digit range, leading to further earnings acceleration in the
years ahead.
Further, ATT expected capital spending to be flat year over
year at $20 billion and free cash flow in the range of $15-$16
billion. Moreover, the company intends to start the share buyback
plan shortly as 300 million share repurchases are remaining under
its share repurchase authorization.
Fourth Quarter Flashback
Lofty subsidies associated with
Apple Inc.
‘s (
AAPL
) iPhone negatively impacted fourth quarter earnings, which lagged
the Zacks Consensus Estimate and remained below the year-ago level.
However, revenue managed to grow year over year, outpacing the
Zacks Consensus Estimate on healthy mobile broadband sales, strong
wireless network performance and improved wireline revenue
trends.
Wireless revenue advanced on the back of strong data revenues
and subscriber growth. Rapid adoption of smartphones including
iPhone 4S, healthy prepaid and reseller subscriber count along with
growth in tablets and connected devices such as automobile
monitoring systems and security systems led to the growth in retail
wireless subscribers. Quarterly post-paid additions were the
highest in five years.
Despite the solid momentum for ATT U-verse and strategic
services, Wireline revenue dipped on weakness in voice and legacy
data products.
Fiscal 2011 Flashback
ATT exited the year with increasing top line but decreasing
bottom line. Wireless business remained healthy while the Wireline
business was a turnaround story. The company continues to enjoy its
leadership in WiFi and boasts of the best Internet speeds in the
industry. ATT is the only US carrier that provides 4G network
through both Long Term Evolution (LTE) and High-Speed Packet Access
Plus (HSPA+) technologies.
The company enhanced its balance sheet by reducing debt.
ATT reduced its net debt by $3.2 million during 2011. This
shows the company’s ability to expand its business further.
Agreement of Analysts
Estimates reflect a negative bias for both the first quarter and
fiscal 2012 over the last 30 days. For the first quarter, 6
analysts out of 24 made downward revisions while 3 moved in the
opposite direction. For fiscal 2012, out of the 31 covering
analysts, 6 revised their estimates downward while 3 revised it
positively.
The analysts made downward revisions primarily based on iPhone
subsidies, which will likely limit ATT’s margins and profits
throughout the year. Additionally, the company is facing hurdles in
managing the rising mobile data traffic resulting from the most
popular iPhone and
Google Inc.
‘s (
GOOG
) Andriod smartphones amid stiff competition and limited wireless
spectrum licenses.
With the unsuccessful ending to the T-Mobile merger story last
year, the company is in need of additional airwaves to expand its
high-speed services. Already criticized for dropped calls and poor
network coverage, ATT will face more constraints in its
capacity deployment compared to its largest rival,
Verizon Communications Inc.
(
VZ
), which will in turn hurt subscriber growth.
Further, ATT is competing fiercely with the aggressive
pricing plans of Verizon and
Sprint Nextel Corp.
(
S
). Moreover, smaller wireless carriers are also offering cost
effective unlimited voice and data plans. This may negatively
influence ATT’s high-end handset sales and challenge
subscriber retention.
Moreover, ATT is facing a potential strike threat in its
wireline division in the East, Midwest, West and legacy should it
fail to negotiate the new labor contract with them; the strike has
not yet been called.
The analysts believe these negatives offset ATT’s strong
subscriber count and average revenue per user, which is driven by
increased penetration of smartphones and iPhones, in the U.S.
market in particular.
Magnitude – Consensus Estimate Trend
The magnitude of revisions for the first quarter remained stable
over the last 7 days at 57 cents, but decreased from 58 cents over
the last 30 days.
Similarly, the Zacks Consensus Estimate for 2012 is $2.33,
unchanged over the last 7 days but down by a penny over the last 30
days.
Neutral Recommendation
We expect this year to be a strong with continued growth in
revenue, earnings per share and free cash flow as well as margin
expansion. Strong adoption of iPhones and Android smartphone sales
coupled with the LTE networks, expanding U-verse services, entrance
into cloud computing and hotel WiFi businesses are expected to
boost the company’s future profitability.
However, persistent declines in traditional voice access lines,
aggressive pricing plans by rivals, iPhone subsidies and intense
competition from cable companies and other alternative services
providers are risks to the stock.
We are currently maintaining our long-term Neutral
recommendation on ATT. The stock retains a Zacks #3 (Hold)
Rank for the short term (1-3 months).
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APPLE INC (
AAPL
): Free Stock Analysis Report
GOOGLE INC-CL A (
GOOG
): Free Stock Analysis Report
SPRINT NEXTEL (
S
): Free Stock Analysis Report
ATT INC (
T
): Free Stock Analysis Report
VERIZON COMM (
VZ
): Free Stock Analysis Report
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