AT&T Q4 Earnings Report Analysis: Missed EPS but Revenue Growth Outpaces Expectations
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Telecommunications giant AT&T recently released its Q4 (Dec) 2023 earnings report, showcasing a mixed performance in the financial market. While the company managed to surpass revenue expectations, it missed earnings per share (EPS) estimates, prompting it to issue downside guidance for its fiscal year 2024 (FY24). In this analysis, we will dissect the earnings report, examine the company's financial performance, and evaluate the implications of its FY24 guidance.
Financial Performance
AT&T's Q4 earnings report revealed EPS of $0.54, excluding non-recurring items, which was $0.03 lower than the estimated $0.57 by analysts. Despite the dip in EPS, the company's total revenue increased by 2.2% year-over-year to $32 billion, exceeding estimates of $31.44 billion.
The breakdown of this revenue growth indicates a 3% range in wireless service revenue growth and a 7% increase in broadband revenue. Furthermore, the company reported an anticipated 3% range growth in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
EBITDA (earnings before interest, taxes, depreciation, and amortization) during the quarter totaled $1.1 billion, representing a 10.2% increase year-over-year. The EBITDA margin* also improved, reaching 33.1% from 31.2% in the year-ago quarter.
FY24 Guidance and Implications
AT&T's outlook for the upcoming fiscal year (FY24) reflects a more cautious stance. The company expects to report EPS in the range of $2.15 to $2.25, falling short of the estimated $2.46. This projection includes several factors contributing to the lower EPS guidance.
The company anticipates higher depreciation expenses of $0.17, resulting from its open radio access network (Open RAN) transformation. Additionally, the FY24 guidance accounts for a $0.07 decline in other income due to reduced non-cash prior service credit amortization included in pension and postretirement benefits costs. A $0.05 lower capitalized interest and a $0.03 lower adjusted equity income from the DIRECTV investment are also factors in the lowered guidance.
Conclusion
While AT&T's Q4 revenue growth surpassed market expectations, its EPS performance fell short of estimates. The company's FY24 guidance indicates a cautious approach, with lower EPS expectations. It remains to be seen whether AT&T's strategic investments in Open RAN and other initiatives will drive growth and enable the company to overcome the challenges outlined in its FY24 guidance. As the telecommunications industry continues to evolve, AT&T's financial performance will be closely monitored for signs of growth and adaptability.