AT&T Q4 FY2021 Earnings Report Preview: What to Look For

Focus on T new mobile subscriptions

Key Takeaways

  • Analysts estimate adjusted EPS of $0.76 vs. $0.75 in Q4 FY 2020.
  • New mobile subscriptions are expected to decline YOY.
  • Revenue is expected to fall by the most in four years after AT&T divested significant parts of its business during the past year.

AT&T Inc. (T) has reported rising profits in every quarter thus far in its 2021 fiscal year, a sharp improvement from 2020 when it posted four straight quarters of declines. The improved profits stem largely from AT&T's drastic overhaul and pruning of operations throughout the past year. The company has divested major businesses including pay TV, media production, and advertising. Last May, AT&T announced plans to spin off entertainment business WarnerMedia into a new joint venture (JV) with Discovery Inc. (DISCA). The transaction is expected to close in mid-2022. The deal recently received a ruling from the Internal Revenue Service (IRS) that should please shareholders: it will be tax-free.

Investors will focus on whether AT&T can continue to boost profits when it reports earnings on Jan. 26, 2022 for Q4 FY 2021. Analysts expect adjusted earnings per share (EPS) to rise slightly as revenue declines for the second straight quarter.

Investors also will be watching another key AT&T metric: the number of new mobile subscriptions, which the company refers to in its financial statements as "postpaid net adds." The metric represents the number of new postpaid wireless subscriptions less the number of canceled subscriptions. Analysts estimate that the number of postpaid subscriptions will fall compared to the same quarter a year ago.

Shares of AT&T have underperformed the broader market over the past year. The stock had been keeping pace with the rest of the market between late January and mid-May of 2021 before making a steep plunge. Its underperformance gap continued to widen until about mid-December, but has rebounded significantly over the past month and a half. AT&T's shares have provided a total return of -2.5% over the past year, below the S&P 500's total return of 14.4%.

One Year Total Return for S&P 500 and AT&T
Source: TradingView.

AT&T Earnings History

AT&T reported mixed results in its Q3 FY 2021 earnings report. Adjusted EPS beat analysts' expectations, rising 15.1% compared to the year-ago quarter. It was the fastest pace of growth since the third quarter of FY 2018. Revenue, however, missed consensus estimates and were down 5.7% year over year (YOY). It was the first revenue decline since the final quarter of FY 2020. The company said that the revenue decline reflected its separation from its U.S. video business as well as other divestments and lower revenues from its Business Wireline unit.

In Q2 FY 2021, AT&T reported earnings and revenue that beat analysts' expectations. Adjusted EPS rose 6.8% YOY, marking the second straight quarter of growth after four consecutive quarters of declines. Revenue grew 7.6% compared to the year-ago quarter, the second consecutive quarter of growth after six straight quarters of declines. The company said that its revenue growth reflected a partial recovery from the adverse impacts of the pandemic in the prior year.

Analysts expect adjusted EPS to increase a meager 1.2% YOY in Q4 FY 2021, nonetheless marking the fourth consecutive quarter of growth. Revenue, however, is expected to fall 11.5%, which would be the largest revenue decline out of any quarter in at least the past four years. For full-year FY 2021, analysts forecast adjusted EPS to rise 5.8%, a significant turnaround from last year's decline of 10.9%. Annual revenue is expected to fall 2.0%, which would be the second straight year of declining revenue.

AT&T Key Stats
  Estimate for Q4 FY 2021 Q4 FY 2020 Q4 FY 2019
Adjusted Earnings Per Share ($) 0.76 0.75 0.89
Revenue ($B) 40.4 45.7 46.8
New Mobile Subscriptions (thousands) 1,115.5 1,229.0 135.0

Source: Visible Alpha

The Key Metric

As mentioned above, investors will focus on AT&T's new mobile subscriptions, which the company refers to as "postpaid net additions." It is also referred to as "postpaid wireless net adds". Postpaid subscriptions differ from prepaid subscriptions in that payments are made at the end of a period based on usage. This key metric reflects the net difference between the number of new postpaid wireless subscriptions and the number of subscriptions that were terminated. In addition to phone subscriptions, the metric also includes subscriptions for tablets, wearables, and other mobile devices. Mobile subscriptions will become increasingly important to AT&T when it completes the spinoff of its WarnerMedia unit and exits the entertainment business.

Unlike AT&T's earnings and revenue results, the company's new mobile subscriptions rose significantly in FY 2020 after losing subscriptions in both FY 2019 and FY 2018. The final two quarters of FY 2020 were especially strong compared to the first two quarters of the year. Throughout the first three quarters of FY 2021, the company has continued to add new mobile subscriptions at a robust pace. AT&T reported 823,000, 1,156,000, and 1,218,000 net new subscriptions in Q1, Q2, and Q3, respectively. In Q4 FY 2021, analysts expect the total number of net new mobile subscriptions to decline 9.2% compared to the 1,229,000 reported in the year-ago quarter. But it is still a significant number of additional mobile subscriptions. For full-year FY 2021, analysts expect the company to report a total of approximately 4,312,500 new mobile subscriptions, nearly double the amount of subscriptions added in the previous year and the most in at least five years.

Article Sources
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  1. The Wall Street Journal. "AT&T Shed Media Assets in 2021. This Year It Wants to Add Investors." Accessed Jan. 25, 2022.

  2. Los Angeles Times. "WarnerMedia-Discovery deal: AT&T gets favorable IRS ruling." Accessed Jan. 25, 2022.

  3. AT&T Inc. "AT&T to Release Fourth-Quarter 2021 Results on January 26." Accessed Jan. 25, 2022.

  4. Visible Alpha. "Financial Data." Accessed Jan. 25, 2022.

  5. AT&T Inc. "AT&T Reports Third-Quarter Results." Accessed Jan. 25, 2022.

  6. AT&T Inc. "AT&T Reports Second-Quarter Results." Accessed Jan. 25, 2022.

  7. AT&T Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 33. Accessed Jan. 25, 2022.

  8. Los Angeles Times. "WarnerMedia-Discovery deal: AT&T gets favorable IRS ruling." Accessed Jan. 25, 2022.

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