AT&T Q1 Profit Slips, But Tops View; Revenues Up

(RTTNews) - AT&T Inc. (T) Tuesday reported a drop in profit for the first quarter, hurt largely by higher operating costs and income tax expenses. Nonetheless, the telecom giant's revenues grew driven mostly by subscriber additions. Both earnings and revenues for the quarter came in ahead of analysts' estimates.

Moving ahead, AT&T lifted its revenue outlook for the full year 2014, while maintaining its earnings forecast.

AT&T said it added 625 thousand wireless postpaid subscribers, up from 296 thousand last year and 566 thousand in previous quarter. This was the best first-quarter subscriber additions in five years.

Both AT&T and Verizon, the two major service providers in US, see increasing competition from T-Mobile US Inc. (TMUS) and Sprint Corp. (S). Postpaid churn rate for the quarter increased to 1.07 percent from 1.04 percent last year.

Dallas, Texas-based AT&T's first-quarter profit dropped to $3.65 billion or $0.70 per share from $3.70 billion or $0.67 per share last year.

AT&T incurred transaction-related costs of $0.01 per share related to Leap Wireless acquisition. The company said it expects to incur about $1.2 billion of integration costs over the next two years and estimates $0.05 of dilution to earnings in 2014. AT&T closed the $1.9 billion Leap acquisition on March 13, 2014.

Excluding special items, adjusted earnings improved to $0.71 per share from $0.64 per share last year. On average, 24 analysts polled by Thomson Reuters estimated earnings of $0.70 per share for the quarter. Analysts' estimates typically exclude special items.

AT&T's revenues for the first quarter grew 3.6 percent to $32.48 billion from $31.36 billion a year ago. Twenty-one analysts had a consensus revenues estimate of $32.44 billion for the quarter.

Total wireless revenues, which include equipment sales, were up 7 percent to $17.9 billion, while wireline revenues edged down 0.4 percent to $14.6 billion.

First-quarter operating costs rose 3.1 percent to $26.2 billion, while income tax expenses rose 23 percent to $1.92 billion.

Looking forward to the full year 2014, the company now expect revenue growth of 4 percent or greater, up from its previous growth forecast of 2 to 3 percent. Analysts currently expect full year revenue growth of 2.70 percent. The company lifted its outlook to reflect the Leap acquisition and strong first-quarter growth.

Meanwhile, AT&T continues to expect full-year 2014 adjusted earnings growth in the mid-single digit range, including Leap operational pressure.

T closed Tuesday's regular trade at $36.29, up $0.23 or 0.64%, on the NYSE. The stock, however dropped $0.89 or 2.45% in after-hours trade.