AT&T forecasts earnings, sales growth following DirecTV deal

DALLAS (TIP): AT&T Inc. forecast annual growth in profit and revenue through 2018 after buying DirecTV and two Mexican wireless companies.

Earnings per share excluding some items will be $2.62 to $2.68 this year, Dallas-based AT&T said Wednesday, August 5, in a statement. Capital spending will be about $21 billion, including interest from airwaves assets and free cash flow will be in the $13 billion range, the carrier said.

With its $48.5 billion takeover of DirecTV completed last month, AT&T is now the No. 1 pay-TV company in the U.S. AT&T reiterated its April outlook for cost savings from the acquisition of at least $2.5 billion by 2018. That’s up from its $1.6 billion forecast at the time the deal was announced in June 2014.

“This doesn’t come as a surprise,” said Roger Entner, an analyst with Recon Analytics LLC in Dedham, Massachusetts.

The company also made its entry into the Mexican market this year with the purchase of Grupo Iusacell SA, that country’s third-largest mobile-phone operator, and Nextel Mexico. AT&T plans to build a national wireless service in Mexico and the first phase of a cross-border mobile service with the U.S.

“We’re a different company than when we began the year,” AT&T Chairman and Chief Executive Officer Randall Stephenson said in the statement.

Annual revenue growth will be in line with or better than gross domestic product growth in 2016 through 2018, the company said. Earnings per share excluding some items will grow in the mid-single-digit range or better, it said.

AT&T fell 2.8 percent to $33.67 at 10:29 a.m. in New York, it’s biggest intraday drop since December. The stock had gained 3.2 percent this year through Tuesday.

Last month, before the DirecTV deal closed, AT&T reported second-quarter earnings excluding some items of 69 cents a share, topping the 64-cent average of estimates compiled by Bloomberg.

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