Sanford Bernstein analyst Jeff Halpern says that despite strong results at Cingular Wireless, the largest U.S. cell phone provider (profit tripled to $847 million), the upside in earnings was entirely a result of cleaning up the Old AT&T balance sheet and some non-operating income from the company’s interest in Latin American telcos Telmex and America Movil.
[W]hile we do expect AT&T to deliver on its commitments for double digit (non pro-forma) earnings growth over the next few years, at this point we do not believe investors should chase AT&T’s shares. We see it as unlikely that AT&T can deliver another year of significant outperformance versus the S&P 500 with risk now evenly split between the up- and down-side cases. [E]xpectations now appear to be baking in a significant announcement by the company increasing its synergy guidance for the BellSouth merger. We continue to rate AT&T Marketperform with a target price of $33.
AT&T shares are up just slightly at $34.57.
Xerox (XRX) beat by a penny analysts’ expectations for profit of 22 cents as earnings rose 27% from the year earlier period, primarily on the strength of color copier sales. Sales of $3.84 billion rose a meagre 2% but also beat analysts expectations, which were for $3.82 billion.
The company’s outlook for the fourth quarter is a little tepid, in a range of just 34 cents to 37 cents a share, meaning it’s slightly below the 37 cents average estimate of analysts.
Xerox shares were up almost 1% at $16.12.