AT&T Raises Earnings Forecast After Profit Tops Estimates

  • Tablet promotions helped offset weaker monthly subscriber adds
  • Satellite operator DirecTV gained users in the U.S. in Q3

AT&T Inc. boosted its 2015 earnings outlook and posted profit that exceeded analysts’ estimates, using tablet promotions to win wireless subscribers while also adding DirecTV satellite-TV customers.

The company revised its 2015 earnings forecast to $2.68 to $2.74 a share, topping the $2.64 average of analysts’ estimates compiled by Bloomberg. Earnings excluding some items were 74 cents a share last quarter, Dallas-based AT&T said Thursday in a statement. Analysts anticipated 69 cents.

AT&T closed its $48.5 billion purchase of DirecTV in late July making it the largest U.S. pay-TV provider. The No. 2 U.S. wireless carrier is using the deal to expand outside the highly competitive U.S. wireless market into satellite TV as well as opening doors to Latin America where the company bought two Mexican wireless carriers to start a cross-border service.

“This could help the stock by showing the DirecTV strategy is working,” said Dave Heger, an analyst with Edward Jones & Co. in St. Louis.

The shares rose 1.7 percent to $34.55 in after-market trading.

AT&T said Wednesday that analysts’ revenue estimates were inflated because the DirecTV deal closed in late July and should not include the full month. Analysts have since lowered predictions to an average of $39.7 billion.

Revenue rose 19 percent to $39.1 billion.

AT&T released its results in a new format with four business units -- business services, home Internet and TV, consumer wireless and international. Previously it reported results in two categories: wireless and landline. In a filing last week, AT&T said it was writing down $1.1 billion from its books -- almost the entire value of DirecTV’s Venezuela assets based on a more conservative currency exchange rate.

The company added 289,000 monthly wireless subscribers, fewer than the average 471,000 estimated by five analysts surveyed by Bloomberg. The carrier also signed up 622,000 tablet and 466,000 new pay-as-you-go customers through AT&T’s Cricket prepaid brand. That’s the best quarter for net prepaid customer additions in almost eight years, AT&T said.

Wireless service margin on earnings before interest, tax, depreciation and amortization widened to 49.4 percent, more than the 45.4 percent analysts predicted.

The company said it lost 91,000 U-verse video customers while gaining 192,000 Internet users. The DirecTV unit reversed a user cancellation trend by gaining 26,000 compared with the loss of 133,000 users in the second quarter and a loss of 28,000 a year earlier.

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