AT&T share price up, posts better-than-expected quarterly results

AT&T Inc reported on Tuesday higher-than-anticipated earnings and revenue in the fourth quarter, despite increased competition from smaller rivals.

For the final three months of last year, AT&T stated a revenue of $34.4 billion, up 3.8% compared year-on-year. Earnings per share were $0.77 on a net loss of $4 billion, in the fourth quarter of 2013 AT&T reported per-share earnings of $1.31 with a profit of $6.9 billion. Excluding some items, earnings per share in the last quarter of 2014 were $0.55.

On average analysts had projected revenue of $34.26 billion accompanied with per-share earnings of $0.54.

AT&T said that costs related to pension and retiree benefit plans hurt four-quarter performance by $10 billion, reflecting a reduction in combined discount rates from 5% to 4.2%. Another contributor to the net loss were merger and integration-related expenses, the company said.

AT&Ts churn, or the rate by which customers canceled their mobile plans with the company, climbed to 1.22%, compared to all-time record for AT&T of 1.11% during the fourth quarter of 2013.

The competition in the US market has increased significantly and AT&T was forced to cut profits in favor of retaining customers during the fourth quarter, when wireless operators usually post their worst performance through the year.

The company said it expanded its core wireless customer base by 854 000 users during the quarter. Meanwhile margin, fell to 36.7% from 37.4% year ago.

During the holiday season people typically look to purchase new phones and Sprint and T-Mobile tried to capitalize on that by offering their devices at discounted prices. Putting more pressure on the top two in the industry, Sprint is offering AT&Ts and Verizons clients to cut their monthly bill by half if they sing up with the third-largest player.

Both Sprint and number four, T-Mobile, said they have added net phone subscribers in the fourth quarter, 400 000 and 266 000 respectively.

Meanwhile, AT&T has been looking to expands its operations in Mexico. The company is waiting for regulatory approval on its $48.5-million takeover deal with satellite television operator DirecTV. Additionally, AT&T announced on Monday it had reached a $1.88-billion agreement to acquire Nextel Mexico, a unit of bankrupt NII Holdings.

Last year AT&T purchased wireless company Iusacell for $2.5 billion, to become the third-largest operator in Mexico, lagging behind America Movil and Telefonica.

AT&T lost 1.12% on Tuesday and closed at $32.81 in New York, marking a one-year decrease of 2.09%. The company is valued at $170.19 billion. On Wednesday the stock edged up 1.43% at 10:39 GMT during after-hours trading.

According to the Financial Times, the 25 analysts offering 12-month price targets for AT&T have a median target of $34.00, with a high estimate of $40.00 and a low estimate of $25.00. The median estimate represents a 3.63% increase from the last close price.