Telecom stocks have been on the upswing in 2022. The next round of earnings reports for the sector should offer clues as to whether the streak will continue. Subscriber additions and revenue will be focus points for investors.
AT&T (ticker: T),
Verizon Communications (VZ), and
T Mobile US (TMUS) will report its first quarter results starting Thursday. The telecommunications giants are boosting their next generation 5G services and invest in new broadband networks—promising faster growth in the next years.
Telecom stocks trailed the market over the past year but have outperformed so far in 2022. Relatively cheap company valuations and defensive business models have become more attractive as interest rates rise. interest and increasing concerns about slowing economic growth. T-Mobile is up 15% year-to-date, AT&T has returned 8.5% including dividends, and Verizon has returned 6%. That compares with a 7.5% loss for the
Should be a good trimester for the industry as a whole. The possibility of subscriber growth slowing significantly, forcing companies to offer discounts, a concern late last year, now seems unlikely to be an issue for at least a few quarters.
“This quarter will be an important quarter to bolster confidence in the wireless industry,” David Barden of BofA Securities wrote in a recent report. “It is increasingly realized that strong fundamentals such as low unemployment, a robust economy and record trade formations will continue to support growth in the near term.”
What to watch on AT&T: AT&T releases its first-quarter results Thursday morning before the market opens. The company is expected to report net income of $4.5 billion, or 61 cents a share after adjustments for one-time factors, on $38.2 billion in revenue. On average, analysts forecast adjusted earnings before interest, taxes, depreciation and amortization (or Ebitda) of $11.9 billion and free cash flow of $5.2 billion.
All these figures include
WarnerMedia, which AT&T spun off just after the first quarter ended. Consequently, more attention will be paid to AT&T communications segment in the period, which is essentially the post-split company. Revenue there is forecast to be $28.2 billion, almost flat year over year, and Adjusted Ebitda is expected to be $11.8 billion, up 3%.
The Wall Street consensus is for postpaid net adds, a very important metric for wireless companies, at about 573,000. That would compare with an average of 1.1 million postpaid net additions per quarter during 2021, which was a blockbuster year for customer growth in the US wireless industry.
AT&T has focused on customer retention in their promotions lately, offering generous device subsidies and upgrade deals to new and existing customers alike. Investors will want to see that reflected in their subscriber numbers on Thursday. They will also be keeping an eye on any impact to AT&T’s average revenue per user or ARPU. It’s expected to be around $53 for postpaid phones in the first quarter, which would represent a 2% year-over-year decline.
Beyond 5G wireless, AT&T’s other main focus, just for telecommunications, is expanding its fiber-optic broadband network. Net additions are expected to be around 288,000.
Key takeaways for Verizon: Verizon is next, reporting Friday morning. Analysts expect $1.34 in earnings per share, which would represent an increase of 3 cents from the first quarter of last year. Adjusted Ebitda and net income are forecast to reach $12.2 billion and $5.7 billion, respectively. Wall Street expects revenue to be $33.7 billion, an increase of about 2%.
Verizon has been less promotional than its competitors, instead focusing on increasing revenue increasing the average revenue per account, or ARPA. That means increasing subscribers to higher-priced plans and selling them more services. Analysts are forecasting a net loss of nearly 50,000 postpaid wireless subscribers on average, but Wall Street expects postpaid ARPA to rise 12% year over year to $135.40. Verizon management has already said it expects faster quarterly growth in subscribers of fixed wireless access, or FWA, essentially home broadband delivered over a 5G network.
Watching T-Mobile. T-Mobile, a company that tends to offer conservative forecasts and increase them as the year progresses, reports on April 27 before the market open. Given that approach, the so-called beat and raise quarters They are almost the rule.
After two years of integrating Sprint’s operations, network and customer base, 2022 should be the year the merger really starting to pay off for T-Mobile. Related costs should start to decline and free cash flow should increase. Management has hinted at the possibility of significant share buybacks in the coming years, so investors will be eager for news on that front.
For the first three months of 2022, analysts are forecasting 44 cents in earnings per share on $20.2 billion in revenue. Ebitda and net income are forecast to reach $6.8 billion and $278 million, respectively.
Wall Street expects T-Mobile to add 1.1 million net postpaid subscribers in the quarter, with postpaid phone ARPU flat at $47.70. T-Mobile said on Wednesday that it had reached 1 million FWA subscribers earlier this month, up from 646,000 at the end of 2021.
Write Nicholas Jasinski at firstname.lastname@example.org