AT&T (T) earnings preview: how strong is the balance sheet?

5:55 pm ET, 19 Jul 2018

AT&T Inc. (T) is expected to report earnings on July 24 after market close.  The report will be for the fiscal quarter ending June 2018.  Shares are trading at 31.90, up 0.73%.

What are T earnings expectations?  What news will the market be watching out for?  

As the U.S. wireless market matures, AT&T has pursued large acquisitions in order to grow and diversify revenue. First, with the DirecTV acquisition, AT&T aims to cross-sell video offerings with its wireless service in the hopes of reducing churn and extracting increased value out of its subscriber base through unique value propositions such as bundled offerings. Second, with the Time Warner (now known as WarnerMedia) acquisition, AT&T hopes vertical integration will provide both revenue synergies and cost efficiencies in content right negotiations. 

The Department of Justice has filed an appeal against Judge Leon’s ruling to allow AT&T to acquire Time Warner (now known as WarnerMedia). When the merger was approved, AT&T agreed to keep WarnerMedia separate while the DOJ decided to appeal in order to avoid the DOJ filing for a stay that would have prevented the merger.

Wall Street analysts haven’t been fans of the deal from the start since it is an expensive way for AT&T to gain content that could have been made available from purchasing rights rather than buying the whole company.  The Time Warner deal adds more than $40 billion of debt to the balance sheet and about $2 billion to AT&T’s annual dividend obligation.

AT&T Inc. has a mixed history of beating analysts’ earnings estimates.  In the past four quarters, the company: 

  • Beat analyst EPS estimates by 5 cents ($.79 actuals vs. $.74 forecast) in FQ2’17;
  • Missed analyst EPS estimates by 1 cent ($.74 actuals vs. $.75 forecast) in FQ3’17;
  • Beat analyst EPS estimates by 12 cents ($.78 actuals vs. $.66 forecast) in FQ4’17;
  • Missed analyst EPS estimates by 2 cents ($.85 actuals vs. $.87 forecast) in FQ1’18.

For FQ2’18, EPS is expected to grow by 11% year-over-year to $.88, while revenue is expected to decline 2% year-over-year to $39.22 billion.  

Over the last month, AT&T Inc. (T) returned -3.77%.

AT&T Inc. (T) average analyst price target ($37.74) is 18.31% above its current price ($31.90).

For the latest price and information on AT&T Inc., please visit Finstead and search for "T price" or "T news".

AT&T Inc. (T) Stock Guide

Updated at: 4:11 pm ET, 18 Sep 2020

Before we start: if you're looking for T stock price, you can quickly find it out by visiting Finny and typing "T quote". If you're looking for a quick scoop on T stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "T". You'll get all this info in one place. Or you can just type "T news" to get the latest stock news.

Looking to buy or sell AT&T Inc. (T)? Interested in getting the full scoop on T, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this T stock guide, we'll address key questions about T, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analyst Predictions: stock forecast and analyst ratings;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are T earnings?
2. What is T dividend?
3. What is T dividend yield?
4. What is T stock forecast (i.e., prediction)?
5. T buy or sell? What is T Finny Score?
6. What are the reasons to buy T? Why should I buy T stock?
7. What are the reasons to sell T? Why should I sell T stock?
8. What are T key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are T earnings?

T trailing 12-month earnings per share (EPS) is $1.64.

2. What is T dividend?

T forward dividend is $2.08.

3. What is T dividend yield?

T forward dividend yield is 6.98%.

Analyst Predictions

4. What is T stock forecast (i.e., prediction)?

Based on T analyst price targets, T stock forecast is $32.40 (for a year from now). That means the average analyst price target for T stock is $32.40. The prediction is based on 30 analyst estimates.

The low price target for T is $17.00, while the high price target is $43.00.

T analyst rating is Hold.

Analysis

5. T buy or sell? What is T Finny Score?

#{finnyScore:63}Our quantitative analysis shows 5 reasons to buy and 3 reasons to sell T, resulting in Finny Score of 63.

6. What are the reasons to buy T? Why should I buy T stock?

Here are the reasons to buy T stock:

  • AT&T and Verizon dominate the U.S. wireless industry. The wireless business generates strong profits and enables the firm to steadily invest in its networks, thereby maintaining its competitive scale-based advantage over smaller rivals.
  • AT&T’s solid positioning across key distribution platforms enables greater scale and integration to better meet customer needs as access pipes converge.
  • The DirecTV deal enhances video scale (now the number-one pay-TV provider) and drives significant cost synergies.
  • AT&T is gearing up to launch the first standards-based mobile 5G services to consumers in multiple U.S. markets by the end of 2018. AT&T has been working hard since 2017 and laying the foundation for mobile 5G network. The company has completed network upgradation in 23 major cities.
  • The FirstNet Project is the first dedicated nationwide wireless network for first responders, which is likely to drive AT&T’s prospects in 2018. AT&T and the First Responder Network Authority (FirstNet) revealed the inclusion of 50 states, two U.S. territories and Washington DC in the FirstNet project. As part of the 25-year contract, FirstNet will provide AT&T with a swath of 20 MHz of spectrum in the 700 MHz frequency band for the entire duration.
  • Since the announcement of the AT&T-Time Warner $85.4 billion cash-and-stock deal in October 2016, the industry has been rife with speculation over whether the deal will get regulatory approval. The pending merger has been approved by antitrust officials in 17 countries and is waiting for the same from Brazil and the United States. AT&T has gained approval from the European Commission, an institution of the European Union (EU) and from the Mexican telecommunications and broadcasting services regulator, Federal Telecommunications Institute (IFT) for this pending deal.
  • AT&T is looking forward to benefit from the following prospects. First, if the new FCC scraps Net Neutrality laws, the ISP (Internet Service Provider) industry will be the major beneficiary. AT&T is a major ISP. Net Neutrality, which disallowed discriminatory pricing policy, has significantly reduced revenues and margins of ISPs. Secondly, the U.S. telecom industry is going to be a major beneficiary of the proposed tax-reform bill of President Trump.
  • Acquisition of the Vyatta network operating system, associated assets of Brocade Communications Systems and hiring of some of Brocade’s employees associated with Vyatta business should act as a tailwind for AT&T’s prospects. This deal will expand AT&T’s SD-WAN and white box capabilities for business customers. The buyout will enable the company to deliver cloud or premises-based VNFs (virtualized network functions) in connection with AT&T Software-defined Wide Area Network (SD-WAN) cloud service with VeloCloud.
  • T profitability is improving. The YoY profit margin change was 10.42 percentage points. See T profitability chart.
  • T forward dividend yield is 6.98%, higher than the industry (0.72%) and sector (0.66%) forward dividend yields. See T forward dividend chart.
  • T forward P/E ratio is 9.12, which is low compared to its industry peers’ P/E ratios. See T forward P/E ratio chart.
  • T average analyst price target ($32.40) is above its current price ($28.93). See T price target chart.
  • T cash to debt ratio is 0.09, higher than the average industry (0.08) and sector (0.09) cash to debt ratio. See T cash to debt chart.

7. What are the reasons to sell T? Why should I sell T stock?

Let's look at the reasons to sell T stock (i.e., the bear case):

  • Intensifying competition in a maturing U.S. wireless market along with continued headwinds in the wireline segments challenge revenue growth and eventually pressure margins.
  • With DirectTV, AT&T bought an aging satellite TV business that will steadily lose customers to the cable alternatives and cheaper over-the-top offerings. DirecTV Now will mitigate, but not entirely offset, these losses.
  • The Time Warner deal will add more than $40 billion of debt to the balance sheet and about $2 billion to AT&T’s annual dividend obligation.
  • Cord-cutting seems to have seriously affected one of the major pay-TV stock like AT&T in the fourth-quarter 2017 financial results. As of Sep 30, 2017, total video connections in the Entertainment Group segment were 25.083 million, down 0.8%. Of the total, Satellite connections tallied 20.605 million, down 0.8%. U-verse connections were 3.691 million, down 18.3%. DIRECTV NOW connections were 0.787 million.
  • In a saturated wireless market, spectrum crunch has become a major issue in the U.S. telecom industry. Most of the carriers are finding it increasingly difficult to manage mobile data traffic, which is growing by leaps and bounds. The situation has become even more acute with the growing popularity of iPhone and Android smartphones as well as rising online mobile video streaming, cloud computing and video conferencing services.
  • AT&T has been trying actively to attract customers with attractive discounts as a counteractive measure against the competition posed by the smaller carriers like T-Mobile US & Sprint Corp. who have been utilizing the same strategy to lure customers. AT&T announced a range of freebies and cash credits to bring in customers and lower the churn rate. However, this might strain the margins going ahead.
  • The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice- over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. These are weighing on the company’s revenues and margins. Moreover, AT&T’s quest for faster growth will increase subscriber acquisition cost in both consumer and SMB (Small and Medium Business) businesses and put pressure on wireline margins.
  • T quarterly revenue growth was -8.90%, lower than the industry and sector average revenue growth (0.59% and 0.60%, respectively). See T revenue growth chart.
  • T PEG ratio (P/E adjusted for growth) is 31.86, which is high compared to its industry peers’ PEG ratios. See T PEG chart.
  • T short interest (days to cover the shorts) ratio is 3.66. The stock garners more short interest than the average industry, sector or S&P 500 stock. See T short interest ratio chart.

Key Stats

8. What are T key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for T:

Metrics T
Price $28.05
Average Price Target / Upside $32.40 / 15.53%
Average Analyst Rating Hold
Forward Dividend Yield 6.98%
Industry Telecom Services
Sector Communication Services
Number of Employees 268,000
Market Cap $209.97B
Forward P/E Ratio 9.12
Price/Book Ratio 1.2
Revenue (TTM) $175.14B
YoY Quarterly Revenue Growth -8.90%
Profit Margin 6.84%

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