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Should You Bet on AT&T Stock Ahead of Q2 Earnings Release?
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AT&T Inc. (T - Free Report) is scheduled to report second-quarter 2024 earnings on Jul 24. The Zacks Consensus Estimate for revenues and earnings is pegged at $30.15 billion and 58 cents per share, respectively.
Earnings estimates for AT&T have declined from $2.24 per share to $2.23 for 2024 and from $2.34 per share to $2.32 for 2025 over the past 30 days.
T Estimate Trend
Image Source: Zacks Investment Research
Earnings Surprise History
The communications service provider delivered a four-quarter earnings surprise of 2.1%, on average. In the last reported quarter, the company pulled off an earnings surprise of 3.8%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for AT&T for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
AT&T continues to enhance its network infrastructure, including 5G and fiber networks, to provide best-in-class coverage and capacity across the nation. The infrastructure investments position it for growth by ensuring widespread access to its services. During the quarter, AT&T announced an additional $3 billion investment by 2030 to bridge the digital divide in the United States, bringing the tally to $5 billion since 2021.
As the digital landscape evolves, AT&T's commitment to closing the digital divide underscores its dedication to fostering inclusive connectivity and driving socio-economic progress. With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. An integrated fiber expansion strategy is expected to improve broadband connectivity for both enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience.
AT&T also entered into a definitive commercial agreement with AST SpaceMobile to provide a space-based broadband network directly to everyday cell phones. The integration of space-based direct-to-mobile technology is designed to complement and integrate with AT&T’s existing mobile network. This approach aims to provide customers with connectivity in locations previously deemed unreachable, enhancing AT&T’s industry leadership in utilizing emerging satellite technologies. These are likely to have generated incremental revenues for the Communications segment.
The Zacks Consensus Estimate for revenues from the Communications segment, which accounts for the lion’s share of total revenues, is pegged at $29.03 billion, while our model projects revenues of $29.08 billion.
However, AT&T is facing stiff competition in the wireless market from other major carriers that are aggressively expanding their networks and improving their offerings. Consumer’s tendency to switch to various low-priced alternatives is hurting the company’s top line. It also has a large debt burden, which dents its competitiveness and limits growth potential. In addition, a challenging macroeconomic environment, inflationary pressures and business uncertainty are forcing consumers to have a conservative approach to higher-tier services.
Moreover, AT&T is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. High-speed Internet revenues are contracting due to the legacy Digital Subscriber Line decline, simplified pricing and bundle discounts. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate, affecting its growth potential to some extent.
Price Performance
Over the past year, AT&T has gained 27.9% compared with the industry’s growth of 26.2%, outperforming peers like Verizon Communications Inc. (VZ - Free Report) but lagging T-Mobile US, Inc. (TMUS - Free Report) .
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, AT&T appears to be trading relatively cheap compared to the industry but well above its mean. Going by the price/earnings ratio, the company shares currently trade at 8.38 forward earnings, lower than 11.13 for the industry and higher than the stock’s mean of 8.15.
Image Source: Zacks Investment Research
Investment Considerations
With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. As the first carrier in the industry, the company has unveiled its 5G policy framework that will hinge on three pillars — mobile 5G, fixed wireless and edge computing. In order to have a seamless transition among Wi-Fi, Long-Term Evolution and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network.
Its 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. It believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices.
However, spectrum crunch has become a major issue in the U.S. telecom industry with a saturated wireless market. 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. A steady decline in legacy services and uncertain business conditions are likely to affect its profitability.
End Note
With a Zacks Rank #3, AT&T appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. A saturated wireless market and price wars owing to competitive pressure have further eroded its profitability. With declining earnings estimates, the stock is witnessing a negative investor perception. Consequently, it might not be prudent to bet on the stock at the moment.
However, a single quarter’s results are not so important for long-term stakeholders, and investors already owning the stock could stay put. By investing steadily in infrastructure and pioneering new technologies, AT&T is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide.
This is likely to translate into solid postpaid subscriber growth and higher average revenue per user in the Mobility Service business. These, in turn, offer some enticing reasons for investing in the stock over a long-term horizon.
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Should You Bet on AT&T Stock Ahead of Q2 Earnings Release?
AT&T Inc. (T - Free Report) is scheduled to report second-quarter 2024 earnings on Jul 24. The Zacks Consensus Estimate for revenues and earnings is pegged at $30.15 billion and 58 cents per share, respectively.
Earnings estimates for AT&T have declined from $2.24 per share to $2.23 for 2024 and from $2.34 per share to $2.32 for 2025 over the past 30 days.
T Estimate Trend
Image Source: Zacks Investment Research
Earnings Surprise History
The communications service provider delivered a four-quarter earnings surprise of 2.1%, on average. In the last reported quarter, the company pulled off an earnings surprise of 3.8%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for AT&T for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
AT&T currently has an ESP of +0.65% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping the Upcoming Results
AT&T continues to enhance its network infrastructure, including 5G and fiber networks, to provide best-in-class coverage and capacity across the nation. The infrastructure investments position it for growth by ensuring widespread access to its services. During the quarter, AT&T announced an additional $3 billion investment by 2030 to bridge the digital divide in the United States, bringing the tally to $5 billion since 2021.
As the digital landscape evolves, AT&T's commitment to closing the digital divide underscores its dedication to fostering inclusive connectivity and driving socio-economic progress. With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. An integrated fiber expansion strategy is expected to improve broadband connectivity for both enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience.
AT&T also entered into a definitive commercial agreement with AST SpaceMobile to provide a space-based broadband network directly to everyday cell phones. The integration of space-based direct-to-mobile technology is designed to complement and integrate with AT&T’s existing mobile network. This approach aims to provide customers with connectivity in locations previously deemed unreachable, enhancing AT&T’s industry leadership in utilizing emerging satellite technologies. These are likely to have generated incremental revenues for the Communications segment.
The Zacks Consensus Estimate for revenues from the Communications segment, which accounts for the lion’s share of total revenues, is pegged at $29.03 billion, while our model projects revenues of $29.08 billion.
However, AT&T is facing stiff competition in the wireless market from other major carriers that are aggressively expanding their networks and improving their offerings. Consumer’s tendency to switch to various low-priced alternatives is hurting the company’s top line. It also has a large debt burden, which dents its competitiveness and limits growth potential. In addition, a challenging macroeconomic environment, inflationary pressures and business uncertainty are forcing consumers to have a conservative approach to higher-tier services.
Moreover, AT&T is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. High-speed Internet revenues are contracting due to the legacy Digital Subscriber Line decline, simplified pricing and bundle discounts. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate, affecting its growth potential to some extent.
Price Performance
Over the past year, AT&T has gained 27.9% compared with the industry’s growth of 26.2%, outperforming peers like Verizon Communications Inc. (VZ - Free Report) but lagging T-Mobile US, Inc. (TMUS - Free Report) .
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, AT&T appears to be trading relatively cheap compared to the industry but well above its mean. Going by the price/earnings ratio, the company shares currently trade at 8.38 forward earnings, lower than 11.13 for the industry and higher than the stock’s mean of 8.15.
Image Source: Zacks Investment Research
Investment Considerations
With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. As the first carrier in the industry, the company has unveiled its 5G policy framework that will hinge on three pillars — mobile 5G, fixed wireless and edge computing. In order to have a seamless transition among Wi-Fi, Long-Term Evolution and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network.
Its 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. It believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices.
However, spectrum crunch has become a major issue in the U.S. telecom industry with a saturated wireless market. 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. A steady decline in legacy services and uncertain business conditions are likely to affect its profitability.
End Note
With a Zacks Rank #3, AT&T appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. A saturated wireless market and price wars owing to competitive pressure have further eroded its profitability. With declining earnings estimates, the stock is witnessing a negative investor perception. Consequently, it might not be prudent to bet on the stock at the moment.
However, a single quarter’s results are not so important for long-term stakeholders, and investors already owning the stock could stay put. By investing steadily in infrastructure and pioneering new technologies, AT&T is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide.
This is likely to translate into solid postpaid subscriber growth and higher average revenue per user in the Mobility Service business. These, in turn, offer some enticing reasons for investing in the stock over a long-term horizon.