On Jan. 25, 2017, AT&T Inc. (T, Financial) reported consolidated revenues of $163.8 billion, operating income of $24.3 billion, net income of $13 billion and adjusted earnings per share of $2.84 for full-year 2016. As the company had strong customer growth during 2016, AT&T outperformed its full-year 2016 guidance.
Brief summary of earnings report
During fourth-quarter 2016, Dallas-based AT&T reported consolidated revenues of $41.8 billion, operating income of $4.2 billion and net income of $2.4 billion. On an adjusted basis, the telecom company reported earnings per share of 66 cents, about three cents higher than fourth-quarter 2015 adjusted earnings. The company increased its free cash flow to $3.7 billion, up 19.2% from the prior-year quarter.
Even though the company’s fourth-quarter 2016 results underperformed fourth-quarter 2015 results, AT&T outperformed its guidance for full-year 2016 as mentioned in the fourth-quarter 2015 earnings report. For full-year 2016, AT&T’s consolidated revenues and adjusted earnings per share increased 11.6% and 4.8% respectively. The company’s full-year free cash flow increased $1 billion despite net income based on generally accepted accounting principles decreasing 2.8% from full-year 2015.
CEO Randall Stephenson praised the company’s solid performance in 2016, a “transformation year” for AT&T. The company strives to become the “global leader in telecom, media and technology” in the upcoming years.
Company announces Time Warner merger after DIRECTV and wireless success
AT&T’s board of directors continued progressing toward their goal of transforming the company into a global leader by launching DIRECT NOW, an innovative “over-the-top” streaming service. On Oct. 22, 2016, the telecom company announced a stock-and-cash merger with Time Warner Inc. (TWX, Financial), a global leader in media and entertainment. Stephenson expects the Time Warner merger to “bring together world-class content with best-in-class distribution,” which leads to higher innovation and customer options.
The telecom company’s merger with DIRECTV contributed to solid full-year 2016 performance, with over 235,000 U.S. DIRECTV satellite net adds with stable linear TV subscriber base. AT&T had 9.5 million wireless Internet net adds in the U.S. and Mexico, with 2.8 million during fourth-quarter 2016. These net adds contributed to solid wireless operating margin of 24.7% and top fourth-quarter service EBITDA margin of 45.4%.
Company has good financial outlook for 2017
Despite a modest financial strength rank of 4, AT&T has a profitability rank of 8 and a Piotroski F-score of 7, both suggesting good business operations and high profitability. The company also has expanding operation margins and consistent per-share revenue growth, outperforming 76% and 64% of global telecom services companies respectively.
For 2017, the company expects single-digit consolidated revenue growth, adjusted EPS growth and adjusted operating margin expansion. AT&T also expects full-year 2017 free cash flow to reach $18 billion, about $1.1 billion higher than full-year 2016 free cash flow. As the company reported solid earnings and a positive outlook, AT&T’s stock price closed at $41.39 per share on Jan. 25, about 50 cents higher than the share price one week ago.
Disclosure: No postion in AT&T or Time Warner Inc.
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