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An Early Preview of Tuesday's AT&T Earnings

By Dan Caplinger - Apr 19, 2013 at 4:33PM

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Will the mobile giant keep reaping rewards from the smartphone revolution?

Next Tuesday, AT&T (T 2.02%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to have an uninformed, knee-jerk reaction that turns out to be exactly the wrong move.

AT&T has transformed itself countless times, going from the revolutionary technology that its nationwide landline network once represented to the voice and data wireless network that has enabled an entire category of mobile devices to rise to near-ubiquity across the nation. But given new competitive threats, is AT&T prepared to deal with its next challenge? Let's take an early look at what's been happening with AT&T over the past quarter and what we're likely to see in its quarterly report.

Stats on AT&T

Analyst EPS Estimate

$0.64

Change From Year-Ago EPS

6.7%

Revenue Estimate

$31.75 billion

Change From Year-Ago Revenue

(0.2%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will AT&T connect with investors this quarter?
Recently, analysts have kept their views on AT&T's earnings almost unchanged, cutting earnings-per-share estimates for the full 2013 year by just a penny. The stock, though, hasn't been flat at all, gaining more than 11% gain since mid-January.

The big news for AT&T over the past quarter has been the continuing trend toward consolidation among its rivals. Sprint (S) is now the subject of a bidding war between two potential acquirers, so its position in the domestic market will almost certainly increase in the near future as a capital infusion reinvigorates its business. Meanwhile, T-Mobile is now apparently poised to merge with MetroPCS. As a result, AT&T can no longer count on being part of an unchallenged U.S. duopoly.

Yet a potentially larger deal involving archrival Verizon (VZ 2.03%) might actually help AT&T achieve some of its broader strategic goals. A report earlier this month speculated that Verizon and AT&T might get together to buy out British telecom giant Vodafone (VOD 3.44%). The massive transaction would involve Verizon taking full control of the Verizon Wireless joint venture, of which Vodafone currently owns 45%. For AT&T, the deal would give it Vodafone's international assets, which represent the company's best chances for growth, given its already dominant position within the U.S. market.

One interesting fight that AT&T is taking on is Google's (GOOGL -4.95%) fiber-Internet initiative. With Google expecting to build a gigabit fiber network in Austin, Texas, AT&T, which serves the city, has responded with its own gigabit fiber network plans. Neither network is likely to appear before next year, but what happens in Austin could define the future of high-speed Internet service across the country.

In AT&T's earnings report, be sure to compare the contributions that the iPhone and other popular mobile devices make toward its revenue with the figures that Verizon released earlier this week. As Sprint and T-Mobile seek to gain more prominence, AT&T will need to be sure to defend its market share against Verizon as much as possible.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$21.16 (2.02%) $0.42
Sprint Corporation Stock Quote
Sprint Corporation
S
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,119.40 (-4.95%) $-110.36
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$50.68 (2.03%) $1.01
Vodafone Group Plc Stock Quote
Vodafone Group Plc
VOD
$16.56 (3.44%) $0.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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