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What Is AT&T’s Outlook for 2017?

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AT&T’s outlook on consolidated results for 2017

During AT&T’s (T) recent 4Q16 earnings conference call, AT&T announced its guidance for 2017. AT&T expects adjusted EPS (earnings per share) to grow in the mid-single-digit range in 2017. Analysts expect AT&T’s adjusted EPS to rise ~3.9% on a YoY (year-over-year) basis to reach ~$2.95 in 2017 as compared to $2.84 in 2016.

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Key points from AT&T’s guidance on 2017 results

AT&T expects low-single-digit consolidated revenue growth in 2017, primarily driven by the DIRECTV acquisition. With the DIRECTV acquisition, AT&T has become the leading pay-TV player in the US with 25.3 million subscribers, surpassing Comcast’s (CMCSA) subscriber base.

Also, the introduction of AT&T’s DIRECTV Now over-the-top (or OTT) video streaming service in 4Q16 could help AT&T further diversify from its US wireless business, as online video streaming is another fast-growing space. The new service features 100+ channels. Currently, the major players in the video streaming market are Netflix (NFLX), DISH TV’s (DISH) Sling TV, Sony’s (SNE) PlayStation Vue, and Verizon’s (VZ) Go90.

AT&T’s focus on growing the newly acquired Mexican operations appears to be successful and is offsetting ongoing US weaknesses. In Mexico, AT&T added 1.3 million wireless net subscribers in 4Q16, and total Mexican wireless subscribers for the company are now 12 million. In Latin America, DIRECTV lost 21,000 video subscribers in 4Q16 driven by declines in Brazil. Total Latin American subscribers for the company now stand at 12.5 million.

As a result, going forward in 2017, AT&T expects expansion in its consolidated operating margin. Additionally, capital expenditures and free cash flows are estimated to be $22 billion and $18 billion, respectively.

In the next part, we’ll look at earnings growth from AT&T in 4Q16.

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