AT&T Misses Estimates on Cash Flow, Tops Subscriber Target

(Bloomberg) — AT&T Inc. missed analysts’ estimates for free cash flow in the first quarter but said it’s still on track to meet the full-year forecast. The shares slid in early trading.

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Free cash flow was $1 billion in the period, the Dallas-based phone giant said in a statement on Thursday. That was well below the $3.02 billion Wall Street predicted, according to a Bloomberg survey, and about 6% of the $16 billion the company expects for the year.

The shortfall revives concerns that AT&T is struggling with high costs of phone inventory, network construction and lower contributions from its declining DirecTV joint venture. The company said it expects higher free cash flow levels in the second half of the year.

At the same time, AT&T topped analysts’ mobile-phone subscriber estimates in a sign that the No. 3 US wireless carrier continues to build on its resurgent two-year growth streak, helping to relieve some concerns that the industry is caught in a slowdown.

AT&T shares fell about 2.5% to $19.20 in premarket trading Thursday. The stock is up 7% this year, about even with its peer T-Mobile US Inc. and above Verizon Communications Inc.’s, 2% decline.

The company added 424,000 regular monthly phone subscribers in the first quarter, exceeding the 400,556 that analysts predicted. AT&T posted earnings, excluding some items, of 60 cents a share on $30.1 billion in sales. Analysts predicted 59 cents on revenue of $30.3 billion.

While the company lost 23,000 broadband customers, excluding DSL losses, it signed on 272,000 new fiber subscribers compared with 289,000 a year ago. AT&T said it’s still on track to pass 30 million homes and businesses with fiber by the end of 2025.

Since spinning off its WarnerMedia business to Discovery a year ago, AT&T has rededicated itself to connectivity, and specifically to expanding 5G wireless and fiber optic networks. The shift in business and high levels of capital spending contributed to a surprising dropoff in free cash flow last year.

Capital investment was $6.4 billion in the first quarter, which includes capital expenditures and $2.1 billion for vendor financing. Analysts predicted capex of $5 billion in the first quarter and a $21 billion outlay for the year. Net debt rose to $134.7 billion from $132.2 billion in the fourth quarter.