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AT&T Q3 Profit Tops Estimates; Announces 3-Year Guidance, Capital Allocation

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AT&T Inc. (T) reported third-quarter adjusted earnings per share of $0.94 compared to $0.90, a year ago. On average, 22 analysts polled by Thomson Reuters expected the company to report profit per share of $0.93, for the quarter. Analysts' estimates typically exclude special items. Third-quarter operating income was $7.9 billion compared to $7.3 billion, prior year. Adjusted operating income declined to $9.9 billion from $10.0 billion, and adjusted operating income margin was 22.2 percent compared to 21.9 percent.

Third-quarter consolidated revenues were $44.6 billion compared to $45.7 billion, last year. Analysts expected revenue of $45 billion for the quarter. HBO revenues were up 10.6 percent on higher content sales and stable subscription revenues. For Mobility:
service revenues were up 0.7 percent; and phone net adds were 255,000.

Also, AT&T Inc. announced its 3-year financial outlook and capital allocation plan, which will allow the company to invest in growth areas, retire shares and to pay down debt.

The company's 3-year financial guidance calls for 1 percent to 2 percent per year consolidated revenue growth. For fiscal 2020, AT&T expects: adjusted earnings per share in the $3.60 to $3.70 range; and revenue growth in the range of 1 percent to 2 percent. By 2022, the company expects adjusted earnings per share to be between $4.50 and $4.80.

AT&T said it will continue to actively review its portfolio. In 2019, the company expects to close about $14 billion from monetizing non-core assets. In 2020, the company expects to monetize $5 billion to $10 billion of non-strategic assets. Under the 3-year capital allocation plan, AT&T plans continued modest annual dividend growth. The company plans to pay off 100% of acquisition debt from Time Warner deal.

AT&T said it expects Stephenson to remain CEO through at least 2020. The company will continue with Board refreshment with one prospective new director to be considered at next Board meeting and another in 2020.

"The objectives we have outlined today have been central to our plans for many months, even before we closed our acquisition of Time Warner. Our thinking has also benefited from our engagement with our owners, including Elliott Management," said Randall Stephenson, AT&T CEO.

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