Telecom Earnings Are Coming. What to Expect From AT&T, Verizon, Comcast, and More.

AT&T reports earnings on Jan. 26. Any updates on the in-progress separation of WarnerMedia—and its subsequent merger with Discovery (DISCA)—will get plenty of attention. That deal is currently scheduled to close around the middle of this year, but with a thumbs-up recently secured from antitrust regulators in Europe and a positive ruling from the U.S. Internal Revenue Service, that timeline could be accelerated. 

Morgan Stanley’s Simon Flannery will be listening for any update on whether the transaction will be structured as a spinoff or a split, whether an exchange offer will be part of it, and what AT&T’s post-WarnerMedia dividend policy will be. AT&T management may give 2022 guidance only for the remaining wired and wireless telecom businesses, including subscriber targets for mobile lines and fiber connections.

Analysts on average expect AT&T to report 76 cents in adjusted earnings per share, which would be up 1.2% from the same period last year, on $40.3 billion in revenue. The company has topped Wall Street EPS estimates for six consecutive quarters.

Anything T-Mobile management says about their plans for share buybacks will be closely followed when the company reports on Feb. 2. This year will be a big one for T-Mobile’s integration of Sprint. The acquired company’s network is set to be shut down in the coming months and remaining customers will moved to T-Mobile’s infrastructure. That will have implications for subscriber churn, T-Mobile’s capital expenditures, and the promised cost savings from the merger.

T-Mobile’s guidance is for free cash flow to increase markedly once that process is completed, supporting potentially $60 billion of share buybacks from 2023 to 2025—versus a current market value of about $134 billion. T-Mobile bulls see that repurchase program beginning as soon as during the second half of 2022.

For the fourth quarter, Wall Street expects 13 cents in earnings per share and $21 billion in revenue. T-Mobile management tends to guide conservatively and then exceed its targets, and 2022 forecasts should follow that pattern.

Verizon Communications (VZ) closed its acquisition of prepaid phone provider Tracfone in the middle of the fourth quarter, which could muddy some of its subscriber results when it reports on Jan. 25. Analysts on average expect to see 535,000 postpaid phone subscriber net adds—meaning those who pay a monthly bill—while AT&T and T-Mobile added a combined 1.7 million in the quarter. Wall Street analysts expect Verizon to report a net loss of 76,000 prepaid subscribers.

Verizon management is sure to point to service revenue growth rather than subscriber adds, and talk up the recent launch of its expanded 5G network using new C-Band spectrum as a catalyst for catching up with competitors’ subscriber growth. Analyst consensus is for a 6.4% year-over-year increase in adjusted earnings per share, to $1.29, despite a 2.1% decline in revenue, to $34 billion.

Shares of cable companies have had a similarly tough stretch in 2021, as investors worried about the outlook for continued broadband internet subscriber growth after a pandemic-related boost. That puts more weight on average revenue per user, or ARPU, metrics in the fourth quarter.

Comcast (CMCSA) is scheduled to report on Jan. 27, and analysts expect a 30.6% jump in adjusted earnings per share, to 73 cents, on 7.4% revenue growth, to just under $30 billion. Management is confident that the company’s Xfinity cable business can expand profit margins fast enough to keep earnings growing steadily—even if subscriber growth slows. So far, investors have wanted to see proof in the numbers.

The bogey for Comcast in the fourth quarter is broadband ARPU growth in the mid-single digit range and cable profit margins expansion of at least a percentage point, according to Oppenheimer’s Timothy Horan.

Wall Street analysts forecast broadband net additions of 250,000, a loss of 430,000 video subscribers, and 294,000 new Xfinity mobile wireless subscribers.

At Comcast’s NBCUniversal segment, reopened theme parks, the winter Olympics beginning in early February, and midterm election-related political advertising suggest a positive setup for 2022 and a return to prepandemic sales and earnings this year. Fourth-quarter results at the segment are expected to easily top the depressed year-ago period. 

Charter Communications (CHTR) is facing a similar subscriber growth slowdown as Comcast’s cable business. Investors will want to see ARPU growth and wider profit margins in the fourth quarter. Analysts are bullish on Spectrum Mobile subscriber growth.

Altice USA (ATUS) hit some operational hiccups last year, and its shares tumbled almost 60% from a May 2021 high. Fourth-quarter numbers won’t do much to change the narrative, and management guidance and commentary about the future will be more important. The wildcard for the now much-cheaper Altice in 2022 is a possible take-private transaction by the company’s chairman, Patrick Drahi. His entities control more than 90% of Altice USA’s voting rights and a nearly 50% economic interest.

Cell-tower real estate investment trusts bucked the trend among telecom stocks in 2021, with American Tower (AMT), Crown Castle International (CCI), and SBA Communications (SBAC) stocks all returning at least 33%. Those firms are clear beneficiaries of carriers spending tens of billions of dollars on expanding their 5G networks and upgrading existing towers to support C-Band and other new spectrum.

The question for investors looking at all three REITs is how much of that tailwind is already priced into their stocks, which are pricey relative to the market and their own histories and could face pressure from rising bond yields in 2022. Management’s year-ahead guidance will be a focus. Crown Castle is the first of the three to report, on Jan. 26. 

Write to Nicholas Jasinski at [email protected]