AT&T Earnings Up 49.7 Percent; Ameritech's Up 4 Percent
Apr. 16, 1986
Undated (AP) _ American Telephone & Telegraph Co. said Wednesday its first-quarter profit jumped 49.7 percent from a year earlier, boosted by cost-cutting, a strong performance in long-distance services and a new way of accounting for pension expenses.
The gain substantially exceeded analysts' forecasts and helped boost the entire stock market along with factors such as lower interest rates and oil prices and emotion over the Libyan conflict.
AT&T rose $2.12 1/2 to $24.50 in consolidated trading as the Dow Jones average of 30 industrials soared to a record close of 1,847.97.
AT&T said its first-quarter profit rose to $530 million, or 47 cents a share, from $354 million, or 31 cents a share, a year earlier. Revenue rose 5 percent to $8.75 billion from $8.31 billion.
The accounting change alone added $100 million, or 9 cents a share, to the bottom line. AT&T said it plans to contribute the same amount to its pension plan as before, but will reduce how much it lists as an expense on its income statement.
Also Wednesday, Chicago-based Ameritech said its profit rose 4 percent on a 3.5 percent gain in revenue. Ameritech is one of the seven regional Bell holding companies formed from the breakup of AT&T's Bell System in 1984.
AT&T's results reflect ''the strong momentum that has been bubbling up within the core of our operations for the past year or so,'' AT&T Chairman Charles Brown said in a statement.
Brown released the earnings at the company's annual meeting in San Francisco, his last before his scheduled retirement in August.
Analysts had expected earnings of less than 40 cents a share instead of 47 cents and were pleased with the results. ''I thought they were fabulous,'' said Glenn Pafumi of Dean Witter Reynolds Inc. ''They're turning the company around.''
Strong long-distance revenue and sales to the telephone industry were somewhat offset by continued sluggishness in computers, electronic components and office-communications equipment, Brown said.
Pafumi said AT&T's profits should continue to improve through further reductions in its workforce and a revival in demand for computers, which could occur in 1987.
The pension accounting change brings AT&T into conformity with a rule of the Financial Accounting Standards Board, an independent board that establishes guidelines for corporate accounting.
AT&T will recognize pension benefits each year as they are earned by employees rather than averaging total pension costs over the working lives of employees.
AT&T said the earnings gain from the accounting change on pensions should continue for the ''near term,'' but it did not say for exactly how long. The company said it also is studying whether to change the way it funds its pensions to bring it in line with the new way it lists the contributions as an expense.
Ameritech said its first-quarter net income rose to $284.7 million, or $2.93 a share, from $274.3 million, or $2.80 a share, in the year-ago period. Revenue climbed 3.5 percent to $2.29 billion from $2.21 billion.
Ameritech Chairman William L. Weiss said at a news conference before the company's annual meeting in Detroit that revenue was up because of growing demand for local network services from Ameritech's Bell companies, and increased long-distance calling volumes within the five states they serve.
''Both are clear signs of a strong economy,'' Weiss said.
Ameritech is the parent company of subsidiaries providing telephone service in Illinois, Indiana, Michigan, Ohio and Wisconsin.