BREAKING: Market Starts Strong As This Solar Stock Breaks Out
AT&T stock tumbled Thursday after the telecom company added more wireless postpaid phone subscribers than expected in the June quarter but lowered its full-year free cash flow outlook. Most of the 2022 gains of T stock evaporated.
“While AT&T’s wireless business posted materially better-than-expected Q2 results, a $2 billion cut to 2022 FCF guide muddled the outlook,” said Wells Fargo analyst Eric Luebchow in a report. “Despite earnings guidance remaining unchanged, AT&T is feeling cash flow pressure from a lengthening of customer collections and higher device payments on top of inflationary pressures.”
He added: “AT&T also wouldn’t commit to the $20 billion FCF guide they previously gave for 2023, which increasingly looks aspirational vs. realistic based on the Q2 print.”
AT&T earnings excluded WarnerMedia, spun off in early April, and DirecTV. AT&T (T) said second-quarter adjusted earnings from continuing operations were 65 cents, down 11% from a year earlier. Revenue for T stock fell 17% to $29.6 billion.
Analysts had projected AT&T earnings of 61 cents a share on revenue of $29.5 billion, according to FactSet. A year earlier, AT&T stock earned 73 cents a share on revenue of $44 billion. AT&T said its adjusted profit from just stand-alone operations —excluding the WarnerMedia and DirecTV units — were 64 cents a year earlier.
AT&T stock tumbled 7.6% to close at 18.92 on Thursday.
Also, AT&T said it added 813,000 postpaid wireless phone customers vs. estimates for a 562,000 gain. AT&T’s wireless service revenue climbed 5.2% to $19.9 billion vs. estimates of $19.7 billion.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 2.5% to $8.2 billion.
Free cash flow generated from continuing operations in Q2 was $1.4 billion amid higher capital spending, the company said. That missed consensus estimates of $4.62 billion in FCF.
“Free cash flow of just $1.4 billion was a very large miss for the second straight quarter, coming in fully 70% lower than consensus,” said Craig Moffett, analyst at MoffettNathanson in a report.
AT&T lowered its full-year free cash flow guidance to a $14 billion range from a $16 billion range.
In its earnings release, AT&T said: “This outlook reflects the expectation of lower vendor device payments by more than $3 billion, approximately $2 billion in lower capital investment, benefits from first half of the year customer growth, which include recent price increases, and lower cash interest payments.”
AT&T added: “We expect these benefits to be partially offset by reduced distributions from DirecTV and our expectations for some incremental pressure on cash collections.”
AT&T stock had climbed 10% in 2022 ahead of the earnings report.
Heading into the AT&T earnings report, the telecom stock owned a Relative Strength Rating of 91, according to IBD Stock Checkup. Also, T stock had neared an entry point of 21.49 from a cup-with-handle base.
WarnerMedia merged with Discovery in early April. The new media company is called Warner Bros. Discovery (WBD).
AT&T cut its annual dividend by 46% to $1.11 per share because of the WarnerMedia spinoff. Still, AT&T offers a dividend yield of 5.43%.
“Management did not commit to any dividend-specific actions going forward, notably deferring to the board on any future dividend growth, which we believe is the most critical aspect,” said Raymond James analyst Frank Louthan in a report. “We remain hopeful for a token dividend increase, with buybacks also a possibility. We expect more clarity on this before year-end.”
Also, AT&T spun off DirecTV to TPG Capital in August 2021.
If you’re new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
YOU MAY ALSO LIKE:
Stock Market Comeback Continues As Bulls Catch Bears; Netflix Boosts This Group
Bear Market News And How To Handle A Market Correction
Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists
Chart Reading For Beginners: Nvidia, Amazon, Pinterest Reveal This Key Investing Skill
7/27/2022 Despite being one of the most recognizable wireless carriers in the U.S., AT&T stock has had a rough year. But…
7/27/2022 Despite being one of the most recognizable wireless carriers in…
Get instant access to exclusive stock lists, expert market analysis and powerful tools with 2 months of IBD Digital for only $20!
Get market updates, educational videos, webinars, and stock analysis.
Learn how you can make more money with IBD’s investing tools, top-performing stock lists, and educational content.
Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice.
*Real-time prices by Nasdaq Last Sale. Realtime quote and/or trade prices are not sourced from all markets.
Ownership data provided by Refinitiv and Estimates data provided by FactSet.
© 2000-2022 Investor’s Business Daily, LLC. All rights reserved
