When AT&T reports second-quarter earnings early Thursday, anything that impacts its dividend yield outlook likely will matter most to investors. AT&T stock has climbed in 2022 as recession-resistant companies gain favor.
AT&T's revenue is expected to drop 33% to $29.56 billion owing to the spinoff of WarnerMedia. Analysts predict that AT&T earnings will fall 9% to 61 cents a share.
Analysts expect earnings before interest, taxes, depreciation and amortization, or EBITDA, to come in at $10.43 billion. In addition, AT&T will generate free cash flow of $4.62 billion, consensus estimates say.
AT&T Stock: Dividend Cut
AT&T cut its annual dividend by 46% to $1.11 per share because of the WarnerMedia spinoff, completed in March. Still, AT&T offers a dividend yield of 5.43%.
At Raymond James, analyst Frank Louthan in a report said the restructured AT&T has a much "simpler story" for investors. The company also divested satellite TV firm DirecTV.
"The elimination of volatile subscriber metrics from DirecTV and (WarnerMedia) asset sales is highly fortuitous," he said. "We believe simple recurring revenue names with solid dividends like AT&T are better performers in a difficult tape, and with macro issues impacting the market, we believe AT&T can outperform."
AT&T stock fell 1.5% to close at 20.48 on the stock market today. T stock has climbed 10% in 2022.
At Wells Fargo, analyst Eric Luebchow has a mixed view.
"Despite $1 billion of inflationary cost pressures, AT&T also has $2 to $3 billion of additional cost cuts underway," he said. "Further, its recent targeted fee increase for legacy customers should bring in up to $1 billion of incremental EBITDA. Still, there are challenges ahead — a slower start to its midband 5G deployments and exposure to legacy wireline assets."
Leadership In Postpaid Phone Subscribers?
Heading into the June-quarter AT&T earnings report, one question is whether AT&T will again lead T-Mobile US and Verizon Communications in postpaid phone subscriber additions. Analysts expect AT&T to add 562,000 postpaid phone subscribers.
Craig Moffett, an analyst at MoffettNathanson, holds a market-perform rating on T stock.
"AT&T's shares have held up better than the broader market amid the sell-off in higher growth equities and in a flight to 'safe' yield," he said in a report. "But the relative outperformance has left AT&T trading at a much smaller discount to the broader market than we believe is warranted given its below-average growth prospects."
TMUS stock has outperformed AT&T in 2022. Telecom stocks generally are doing better than the S&P 500 this year.
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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
