AT&T Says Revenue Estimates `Inflated' Because of DirecTV

  • DirecTV deal closed in late July; shouldn't include full month
  • AT&T scheduled to report earnings after the close Thursday

AT&T Inc. said analysts’ estimates for third-quarter revenue are “inflated” because its acquisition of satellite-TV provider DirecTV closed in late July and predictions for the unit shouldn’t include the full month.

“Under GAAP we are only allowed to include revenue beginning July 25 so
current consolidated revenue consensus estimates are inflated,” the Dallas-based carrier said Wednesday in a statement. “This is a one-time variance as analysts sort through some of the normal modeling of an acquisition.”

Analysts on average anticipate third-quarter revenue of $40.2 billion, the average of 15 estimates compiled by Bloomberg. The predictions range from $39.3 billion to $42.3 billion. For comparison, the reported revenue for AT&T and DirecTV combined was about $41 billion in the third quarter of 2014.

“It is clear many revenue estimates for DirecTV include the full month of July,” AT&T said.

Jonathan Chaplin, an analyst at New Street Research, said his firm is updating their estimates, which originally included the full month of July.

“What they’re saying is entirely plausible -- that numbers are too high -- because people have accounted for the DirecTV deal a little lazily,” said Chaplin, who questioned why the company made the statement now. “If analysts’ estimates have been inflated, they’ve probably been inflated for a month or two.”

Other analysts also pondered the timing of AT&T’s announcement.

“It seems odd for AT&T to call out consensus 24 hours before they report,” said Walt Piecyk, an analyst with BTIG LLC. “It’s not clear why the company could not simply provide non-GAAP pro-forma results as a supplement,” he said. Piecyk said he’s not revising his estimate.

Kevin Roe, an analyst with Roe Equity Research, said AT&T’s statement sounded more like an accounting and treasury issue and not a real reflection of its underlying business.

New Format

The company, which paid $48.5 billion for DirecTV, said last week it will release results in a new format showing four business units -- business services, consumer landline and TV, consumer wireless and international. Previously the company had two categories: wireless and landline. AT&T also said at the time it’s writing down $1.1 billion from its books -- or almost the entire value of DirecTV’s Venezuela assets based on a more conservative currency exchange rate.

AT&T shares fell 0.4 percent to $33.60 at the close in New York, after rising as much as 0.6 percent earlier in the day. The stock is little changed this year.

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