AT&T Inc. (NYSE: T) stock fell 4.5% on July 25th, 2018 (as of 1:01 PM GMT-4; Source: Google finance) after the company fewer wireless customers. The company has reported mixed results for the second quarter 2018 and this is the first result report since a district judge approved AT&T’s highly contested $85.4 billion acquisition of Time Warner (renamed as WarnerMedia) in June. The companies moved quickly to close the deal and begin combining operations but the Justice Department appealed the court’s decision, to the surprise of AT&T executives, who expressed their commitment to defending the court’s decision and the landmark merger.
T in the second quarter of FY 18 has reported the adjusted earnings per share of 91 cents, beating the analysts’ estimates for the adjusted earnings per share of 85 cents. The WarnerMedia earnings contribution of about $0.02 from the 16 days was slightly more than what to be expected from such a short period. The company had reported the adjusted revenue of $38.99 billion in the second quarter of FY 18, missing the analysts’ estimates for revenue of $39.99 billion. However, the revenue grew year-over-year, due to gains in both service and equipment revenues. The service revenues were also up almost 2% sequentially. Strong sales in BYOD has supported that growth. The equipment revenues were up, due to customers’ purchasing habits and their choice of more expensive devices. The margins are good with service margins coming in over 50% on a comparable basis. Looking ahead, the company expect positive service revenue growth for the full year on a comparable basis.
Moreover, in the second quarter, Business Solutions group revenues were down due to gains in wireless and strategic business services helped offset declines in legacy services. Business wireless with strong growth, are up more than 4% which is driven by both equipment and service revenues. Wireline revenues were down more than 4% year-over-year. In the International business, strong customer performance has helped to offset currency pressures. The revenues of it were stable year-over-year, while margins were pressured by World Cup expenses as well as foreign exchange.
Additionally, T has raised the adjusted earnings per share growth to the upper end of the $3.50 range with WarnerMedia included. The company has raised expected free cash flow to the upper end of the $21 billion range with dividend coverage in the low 60% range. In addition, Net debt to EBITDA is projected to be in the 2.9x range by the end of this year and a 2.5 range by the end of next year.