AT&T Corp. (NYSE: T) surpassed the consensus estimate in the fourth quarter and told analysts to expect slightly lower earnings in the first.
Before the market opened, AT&T reported fourth quarter operating earnings of $1.84 billion, or 57 cents a share, on sales of $16.3 billion. Wall Street was expecting earnings of 55 cents a share according to First Call.
During a conference call with analysts, company executives predicted first quarter operational EPS ranging between 50 and 54 cents per share, slightly down from fourth quarter results. Communications companies typically spend more on sales and marketing in early months so they have a larger customers base for most of the year, CFO Charles Noski said.
"What you're seeing in the first quarter is really the seasonality of this business," he said.
AT&T expects stronger growth this year in later quarters, especially in the second half of 2000, as more of its cable network is upgraded. The company reaffirmed previous expectations of full year earnings ranging between $2.10 and $2.15 per share.
"I think we've come a long way in the last 12 months." said C. Michael Armstrong, chairman and CEO. "We've captured operational, but just as important the market, momentum to realize the potential of all the acquisitions and investments we've made ... I'm confident we can accelerate that growth."
In the fourth quarter a year ago, AT&T reported a profit of 68 cents a share on sales of $15.4 billion. AT&T said profit slipped due to the acquisition of cable company TCI, now known as AT&T Broadband.
AT&T (full earnings release) also took a pretax charge of $804 million against fourth quarter earnings, reducing net income by $496 million, or 15 cents a share. The charge includes about $530 million for replacing existing infrastructure for its wireless unit and a loss from the sale of an international unit and severance costs for 2,800 employees.
The company sliced and diced its earnings in many ways. Excluding its broadband and global network services, AT&T reported a profit of 84 cents a share in the fourth quarter. Operational cash earnings, which excludes the amortization, goodwill associated with acquisitions, equity investments, and other purchased intangibles, were 65 cents a share. Earnings from continuing operations were 36 cents a share.
The earnings figures mentioned above are used as a guide based on different assumptions. Wall Street looks at the operating earnings of 57 cents a share.
As for the fourth quarter revenue growth of 5.9 percent, AT&T put a positive spin on the results, indicating it was investing for the future.
Across AT&T's numerous business units, AT&T wireless, which will be spun off in a tracking stock, showed the most growth. AT&T's wireless business had sales of $2.1 billion, up 41 percent from a year ago as subscribers jumped to 12.2 million from 9.6 million a year ago.
Business services sales were up 6 percent to $6.3 billion, but consumer sales were down 4.5 percent to $5.4 billion because of price competition in the long distance market. Broadband revenue was $1.5 billion, up almost 8 percent from a year ago.
Looking forward, AT&T said it expects to take charges in the first half of 2000 related to "continuing efforts to cut costs by $2 billion by the end of the year and the planned closing of the company's merger with MediaOne (NYSE: UMG)."
For the year, AT&T pro forma revenue for 1999 was $64.14 billion, compared to $60.4 billion in 1998. Operating earnings were $2.20 a share, compared to $2.35 a share in 1998. The 1999 results were two pennies ahead of expectations.
-- Sergio G. Non contributed to this report.