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What to Watch in AT&T’s Q2 Earnings

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On Monday, AT&T (T) closed at $32.13—2.0% lower than its previous close, 19.9% higher than its 52-week low of $26.80, and 6.5% lower than its 52-week high of $34.37. As of Monday, the stock has risen 12.6% on a year-to-date basis. The company’s market cap was $234.5 billion. AT&T’s 12-month forward PE ratio, PE-to-growth ratio, price-to-sales ratio, price-to-book ratio, and price-to-cash ratio are 8.93x, 5.27x, 1.28x, 1.27x, and 4.79x, respectively.

Read Will AT&T Stock Continue to Rise? and Why AT&T Stock Is Down 2.2% Today to learn more.

AT&T’s second-quarter earnings report 

AT&T is the second-largest wireless service provider in the US. The company wants to showcase its strength before its second-quarter earnings. AT&T will likely report its second-quarter results for before the market bell on Wednesday.

AT&T will likely report an adjusted EPS of $0.89—a fall of 2.2% on a YoY (year-over-year) basis. Analysts expect AT&T’s total revenues to increase 15.1% YoY and reach $44.9 billion in the second quarter. The company will likely report 80,000 postpaid phone customer net additions.

In the first quarter, AT&T gained 80,000 postpaid phone net customers. However, the company lost net 544,000 Premium TV subscribers—more than analysts’ expectation of 385,000 net losses. Premium TV consists of DIRECTV satellite and U-verse television subscribers.

T-Mobile (TMUS) will likely report 650,000 postpaid phone customer net additions in the second quarter. Sprint (S) will likely report a loss of 200,000 postpaid phone net subscribers in the second quarter.

Prepaid customers

For the second quarter, analysts expect 100,000 prepaid subscriber net additions from AT&T compared to 453,000 net additions in the second quarter of 2018. In the first quarter, AT&T gained 96,000 net prepaid customers. Notably, the strength came from the Cricket brand.

At the end of the first quarter, AT&T’s prepaid customers increased 9.6% YoY to 17.2 million. T-Mobile’s number of prepaid customers increased 1.6% YoY to 21.2 million. Meanwhile, Sprint’s prepaid customers fell 1.9% YoY to 8.8 million.

T-Mobile will likely report 20,000 prepaid subscriber net additions in the second quarter. Sprint will likely report 50,000 prepaid subscriber net losses in the second quarter.

Postpaid phone churn rate

For the second quarter, analysts expect AT&T to report a postpaid phone churn rate of 0.88% compared to 0.82% in the second quarter of 2018. The higher churn rate is due to stiff competition in the telecommunications sector.

In the first quarter, AT&T reported a postpaid phone churn rate of 0.93% compared to 0.84% in the first quarter of 2018. A higher churn rate is negative for wireless carriers. They have to deal with additional acquisition expenses, which has a negative impact on their operating margins. A higher churn rate might concern investors.

In comparison, T-Mobile will likely report a postpaid phone churn rate of 0.85% in the second quarter. Sprint will likely report a postpaid phone churn rate of 1.75% in the second quarter.

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