AT&T Inc. T is scheduled to report fourth-quarter 2021 results, before the opening bell, on Jan 26. In the fourth quarter, the company is likely to have recorded higher revenues year over year from the WarnerMedia segment due to significant traction from the streaming platform of HBO Max.

Factors at Play

The WarnerMedia segment represents the various business units of the erstwhile Time Warner, namely, Turner, Home Box Office and Warner Bros. It also includes AT&T’s Regional Sports Networks in the Turner division and Otter Media.

The company witnessed healthy traction in HBO Max with a steady increase in subscriber base during most of the quarter, buoyed by various subscription options and unrivaled access to global fan-favorite programs. AT&T ended the fourth quarter with 73.8 million HBO Max subscribers, surpassing its year-end target of 70-73 million. By the end of 2021, the company launched this streaming service in 46 markets in Latin America, the Caribbean and European Union. It intends to make additional launches in 14 other countries in Europe in 2022. These are likely to have positively impacted its fourth-quarter performance.

With higher customer adoption, the segment revenues are likely to have increased during the quarter. Moreover, HBO Max boasts a higher-than-average price of $15 a month and is, therefore, reportedly making more money than some of its streaming rivals. This is likely to have driven the revenue growth in the WarnerMedia segment.

In addition, with live sports and events gaining popularity, TV advertisers have largely returned to the pre-pandemic levels. Intermittent movie releases and series for both traditional TV and streaming services are also expected to have buoyed top-line growth. However, adverse foreign currency translations, evolving market conditions in the aftermath of the deadly virus outbreak, and continued investments in HBO Max for new content production, foregone licensing revenues and platform costs are likely to have led to soft margins.

Overall Expectations

The Zacks Consensus Estimate for revenues from WarnerMedia is pegged at $9,144 million, indicating an improvement from $8,554 million reported in the year-ago quarter. Operating income is pegged at $2,140 million, implying a decline from $2,542 million reported in the prior-year quarter. The consensus mark for EBITDA from the segment stands at $2,384 million, suggesting a fall from $2,719 million.

The Zacks Consensus Estimate for total revenues of the company stands at $40,422 million, indicating a decline from $45,691 million reported in the prior-year quarter. The consensus mark for earnings is currently pegged at 76 cents per share. It had reported 75 cents in the year-earlier quarter.

Earnings Whispers

Our proven model predicts an earnings beat for AT&T for the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

AT&T Inc. Price and EPS Surprise

AT&T Inc. price-eps-surprise | AT&T Inc. Quote

Zacks Rank: AT&T has a Zacks Rank #3.

Other Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

F5, Inc. FFIV is set to release quarterly numbers on Jan 25. It has an Earnings ESP of +3.65% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Cirrus Logic, Inc. CRUS is +1.48% and it carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jan 31.

The Earnings ESP for Meta Platforms, Inc. FB is +2.52% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Feb 2.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AT&T Inc. (T) : Free Stock Analysis Report

F5, Inc. (FFIV) : Free Stock Analysis Report

Cirrus Logic, Inc. (CRUS) : Free Stock Analysis Report

Meta Platforms, Inc. (FB) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research