By Emily Bary
As approval for T-Mobile US Inc.’s deal with Sprint Corp. looms over the wireless industry, fellow carrier AT&T Inc. (NYS:T) will show of the impact of its own mega-deal when the company reports second-quarter results next Wednesday before the opening bell.
What to expect
Earnings: Analysts surveyed by FactSet project that AT&T earned 89 cents a share on an adjusted basis, down from 91 cents a year earlier. According to Estimize, which crowdsources projections from hedge funds, academics and others, the average estimate calls for 91 cents in EPS.
Revenue: The FactSet and the Estimize consensus models $44.9 billion in June-quarter revenue for AT&T. A year ago, AT&T posted $39 billion in revenue just before finalizing its acquisition of Time Warner.
Stock movement : AT&T shares have fallen following the company’s past five earnings reports. The stock has gained 17% so far this year, while the S&P 500 (S&P:SPX) has risen 19%. Of the 28 analysts surveyed by FactSet who cover AT&T’s stock, 14 have buy ratings, 12 have hold ratings, and two have sell ratings. The average price target is $33.96, 1.6% above current levels.
What else to watch for
As AT&T prepares for the 5G wave, the company has struck arrangements with several big cloud players in recent days. AT&T announced that it would be using International Business Machines Corp.’s (NYS:IBM) technology to “modernize” its AT&T Business Solutions internal software. The company also plans to work with Microsoft Corp. (NAS:MSFT) on a “multiyear alliance” focused on cloud, artificial-intelligence and 5G efforts.
Read: 5 things to know about Sprint/T-Mobile deal
Look for management to comment on the progress of its 5G efforts as well as the pending merger between T-Mobile (NAS:TMUS) and Sprint (NYS:S) . The deal was thought to be beneficial to existing wireless players because it would reduce the number of national carriers to three, giving all more pricing power, but regulators are reportedly interested in seeing Dish Network Corp. (NAS:DISH) step in and become the fourth carrier using assets that Sprint would be forced to divest.
Don’t miss: Dish is in a ‘win-win’ situation even if deal between T-Mobile and Sprint approved, says analyst
Outside of 5G, AT&T will be trying to rebound from “a disastrous -661,000 video loss last quarter that almost single handily was responsible for the 4.3% sell-off,” according to Cowen & Co. analyst Colby Synesael. He expects that the company lost 800,000 video subscribers in the second quarter but that the metric will have less of an impact on AT&T’s earnings this time around.
See more: AT&T can’t escape a crumbling core business
Synesael rates the stock at outperform with a $34 target price.
One dilemma for AT&T with its DirecTV business concerns “Sunday Ticket,” a programming option that lets viewers watch out-of-market National Football League games. “Over the course of the next six to 12 months, AT&T could have the opportunity to address one of the major cost drivers at DirecTV if the NFL chooses to use its option to renegotiate Sunday Ticket this year,” wrote Barclays analyst Kannan Venkateshwar, who rates the stock at equal weight. He said the best option for AT&T would be to drop “Sunday Ticket” and try to pick up “Monday Night Football” instead.
AT&T executives might also speak about the company’s role in the evolving streaming landscape, after announcing plans to launch HBO Max, a new service, next spring. “While we knew this was coming, this represents a significant milestone as AT&T is formally putting its direct-to-consumer stake in the ground,” wrote Wells Fargo analyst Jennifer Fritzsche, who rates the stock at market perform. The company gained attention for the move because it plans to claw back “Friends,” the popular series currently licensed to Netflix Inc. (NAS:NFLX) , to serve as a cornerstone of its new service.