AT&T Inc. (NYSE:T) - the U.S. telecom giant - is scheduled to report its second-quarter 2016 financial numbers on Jul 21, after markets close.
Last quarter, the company posted an impressive 4.35% positive earnings surprise. Moreover, the company’s earnings have surpassed the Zacks Consensus Estimate in three out of the previous four quarters, with an average beat of 5.28%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that the company is likely to beat the Zacks Consensus Estimate because it has the right combination of two key ingredients.
Zacks ESP: AT&T has an Earnings ESP of +2.82%. This is because the Most Accurate estimate stands at 73 cents while the Zacks Consensus Estimate is pegged lower at 71 cents. This is meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: AT&T has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of AT&T’s Zacks Rank #2 and +2.82% ESP makes us confident of an earnings beat this time around.
What is Driving the Better-than-Expected Earnings?
Acquisitions and strategic collaborations have played a major role in shaping AT&T’s growth story. The acquisition of DIRECTC by AT&T has positioned it as the leader in the U.S. pay-TV market and boosted AT&T’s earnings and revenues through enhanced video offerings and lower programming costs. The company is also planning to update its U-verse home Internet plans to enhance the web experience for its home Internet users.
AT&T was focused on expanding its 4G LTE wireless networks in Mexico, where it had around 1 million LTE subscribers as of the first quarter of 2016 and aims to provide 4G LTE mobile Internet service to 100 million Mexican customers by the end of 2018. In Feb 2016, the company requested the Federal Communications Commission (FCC) to grant a license to test 5G technologies on 3.5GHz, 4GHz, 15GHz and 28GHz frequency bands.
AT&T also signed an agreement to acquire QuickPlay Media Inc., a leading digital streaming distribution platform, from Chicago-based private equity firm Madison Dearborn Partners, which will bolster AT&T’s video service capabilities.
Additionally, the company has increased its fiber presence in the global Ethernet market and has also offered many new roaming options for customers in Canada and Mexico.
Yet, a saturated wireless market, spectrum-related issues, persistent losses in access lines, intensifying competition and regulatory concerns remain potent headwinds.
Other Stocks to Consider
Here are some other companies which you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Qualcomm Inc. (NASDAQ:QCOM) with an Earnings ESP of +3.61% and a Zacks Rank #2.
Intel (NASDAQ:INTC) Corporation (NYSE:T) with an earnings ESP of +3.77% and a Zacks Rank #2.
Windstream Holdings Inc. (NASDAQ:WIN) with an earnings ESP of +25.00% and a Zacks Rank #2.
QUALCOMM INC (QCOM): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
WINDSTREAM HLDG (WIN): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
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