Investing.com - AT&T (NYSE:T) stock rose in premarket after the telecoms and media conglomerate reported a big improvement in its key U.S. wireless business in the third quarter, even though earnings fell a tad short of expectations.
AT&T said it added 645,000 postpaid subscribers, net of churn, in the three months through September, after losing over 150,000 users in the previous quarter.
The company also said it had 57 million subscribers for its HBO Max streaming service as of the end of September, with subscriber additions more than doubling from a disappointing level in the second quarter. Domestic subscribers for the HBO/HBO Max services totaled 38 million, already ahead of the full-year target of 36 million.
Net debt edged up slightly to 2.66 times EBITDA, however, as profitability weakened: adjusted earnings per share fell to 76c, from 83c in the prior quarter, and just shy of the 77c consensus forecast.
The company said it now expects 2020 free cash flow of $26 billion or higher with a full-year dividend payout ratio "in the high 50%s". It kept its forecast for gross capital investment unchanged at around $20 billion range.
"For investors, the risk at this point is whether AT&T will be able to successfully transform its business and compete with entertainment sector disruptors like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:NASDAQ:AMZN), and if such a success would save its $0.52 a share quarterly payout" said Investing.com analyst Haris Anwar. "Today’s earnings report needs to dispel any impression that its new video-streaming service is struggling and its WarnerMedia is in turmoil, after it lost two top programming executives in August."
AT&T shares are down 31% from the beginning of the year, and down 32.7% from their 52-week high of $39.70 set on November 18, 2019. They are under-performing the S&P 500 which is up 6.3% from the start of the year.
AT&T's report follows an earnings beat by Verizon on Wednesday, who reported EPS of $1.25 on revenue of $31.5 billion.
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