Shares of AT&T Inc (T) faced downward pressure in early trading on Thursday, following the release of their third-quarter earnings report. The company’s results arrived amidst a flurry of activity during the exciting earnings season. Here’s a breakdown of key insights from prominent analysts:
Oppenheimer’s Optimistic Outlook:
Timothy Horan, analyst at Oppenheimer, maintained an ‘Outperform’ rating for AT&T, while increasing the price target from $23 to $24. Horan highlighted the company’s impressive service revenue growth, which surged 4.0% year-on-year, fueled by an increase in average revenue per user (ARPU) and a one-time boost. He also praised the company’s robust EBITDA growth, reaching 3.4% with margins expanding by 140 basis points to 38.3%. Looking ahead, Horan expects AT&T to benefit from a Republican administration’s policies, citing anticipated lower taxes and reduced regulations that could ease the distribution of broadband subsidies. He believes that the company’s strong network investments, combined with its oligopolistic market position, position AT&T for continued success, making it well-positioned to meet its 2024 guidance.
Scotiabank Highlights Mixed Performance:
Scotiabank analyst Maher Yaghi reiterated an ‘Outperform’ rating and a price target of $24, but acknowledged a mixed performance. While AT&T reported 403,000 postpaid phone net additions, this figure fell short of the 468,000 recorded in the previous year. Despite this setback, Yaghi highlighted positive developments, including improvements in postpaid phone churn and an impressive 1.9% growth in ARPU, driving a 4% increase in wireless service revenue. However, he expects the industry to see a normalization of volumes in 2025, resulting in slightly lower net additions compared to 2024. He anticipates continued ARPU growth driven by pricing adjustments, the uptake of higher-priced plans, and the expansion of value-added convergence services.
RBC Capital Markets Focuses on Revenue and EBITDA:
Jonathan Atkin of RBC Capital Markets maintained a ‘Sector Perform’ rating and a price target of $22. While AT&T’s consolidated revenues declined 0.5% year-on-year to $30.2 billion, missing the consensus estimate of $30.4 billion, Atkin pointed to lower wireless equipment revenues and business wireline performance as the primary culprits. He noted that the company’s consolidated adjusted EBITDA rose by 1.8% year-on-year, reaching $11.6 billion, surpassing the consensus forecast of $11.4 billion. Adjusted earnings per share came in at 60 cents, exceeding market expectations of 57 cents. Atkin commended AT&T’s consistent guidance, highlighting the minimal impact from weather and labor-related factors.
Morgan Stanley’s Perspective on Wireline Segment:
Simon Flannery of Morgan Stanley maintained an ‘Equal-Weight’ rating and a price target of $19. While AT&T’s third-quarter results largely aligned with expectations, Flannery identified the business wireline segment as a persistent drag, with revenues declining by 11.8% year-on-year. Despite this, the company reaffirmed its full-year guidance. Flannery noted that management expects business wireline EBITDA to decline in the high teens this year, compared to the mid-teens previously. He also mentioned the relatively low phone upgrade rates and a rational promotional environment observed by the company.
T Price Action:
At the time of publication on Thursday, AT&T’s shares had decreased by 1.58%, settling at $22.14. The company’s stock performance reflects the mixed signals from its earnings report and the varying perspectives of analysts.
