AT&T Inc. Earnings: Increasing Costs Tighten Margins

Increasing costs did not help S&P 500 (NYSE:SPY) component AT&T Inc. (NYSE:T) in the fourth quarter as the company reversed to a loss. AT&T is a holding company whose subsidiaries and affiliates provide wireless and wireline telecommunications services and products to consumers and businesses worldwide. It also provides directory advertising and publishing services in the United States and international markets.

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AT&T Earnings Cheat Sheet for the Fourth Quarter

Results: Reported a loss of $6.68 billion ($1.12 per diluted share) in the quarter. AT&T Inc. had a net income of $1.03 billion or 18 cents per share in the year earlier quarter.

Revenue: Rose 3.6% to $32.5 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: T reported adjusted net income of 42 cents per share. By that measure, the company fell short of mean estimate of 43 cents per share. Analysts were expecting revenue of $31.95 billion.

Quoting Management: “We had a tremendous year in terms of execution, and we have excellent momentum across our growth platforms,” said Randall Stephenson, AT&T chairman and chief executive officer. “This was a blowout quarter for smartphone sales. Our network performance is at a high level on voice quality and best-in-class mobile download speeds. U-verse sales continue to be strong and business revenue trends are on a good track.”

“Looking ahead, we start 2012 with the best visibility we’ve had in some time, and we’re well positioned to deliver solid results – including continued revenue growth with margin expansion, solid earnings per share growth and strong cash flow,” Stephenson said. “In short order, we will begin share repurchases to deliver significant value to our owners.”

Key Stats:

Gross margin shrank nine percentage points to 46.2%. The contraction appeared to be driven by increased costs, which rose 24.6% from the year earlier quarter while revenue rose 3.6%.

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $3.62 billion in the third quarter, a profit of $3.59 billion in the second quarter and $3.41 billion in the first.

The company fell short of estimates last quarter after being in line with expectations the quarter before with net income of 61 cents.

Revenue rose last quarter after seeing a drop the quarter before. Revenue fell 0.3% to $31.48 billion in the third quarter from the year earlier.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the first quarter of the next fiscal year has moved down from 60 cents a share to 59 cents over the last sixty days. The average estimate for the fiscal year is $2.23 per share, down from $2.32 ninety days ago.

Competitors to Watch: Verizon Communications Inc. (NYSE:VZ), Sprint Nextel Corporation (NYSE:S), CenturyLink, Inc. (NYSE:CTL), General Communication, Inc. (NASDAQ:GNCMA), Cbeyond, Inc. (NASDAQ:CBEY), MetroPCS Communications, Inc. (NYSE:PCS), Cincinnati Bell Inc. (NYSE:CBB), PAETEC Holding Corp. (NASDAQ:PAET), and Frontier Communications Corp (NYSE:FTR).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com