Heading into AT&T's earnings report due early Thursday, shares in the telecom giant have advanced 7% in 2023, better than 2022's flat performance. Still, some institutional investors are cautious on T stock despite the company's return to its telecom roots after divesting media and other assets.
"Among long-only institutional investors, AT&T is the least-owned large-cap stock in the S&P 500," Bank of America analyst David Barden said in a note to clients, previewing AT&T earnings. He added: "At its current discount valuation, we believe growth, yield, deleveraging and cash flow generation will attract incremental investor attention."
AT&T earnings per share for the March quarter are expected to fall 25% to 58 cents. T stock analysts project revenue of $30.2 billion, down 20% amid divestitures.
Among its divestitures, AT&T spun off WarnerMedia in early April 2022. Then, WarnerMedia quickly merged with Discovery to form Warner Bros. Discovery.
T Stock: Wireless Growth Eyed
In the first quarter, analysts expect AT&T to add 396,000 wireless "postpaid" subscribers, down from 691,000 in the year-earlier period. Subscriber growth is expected to slow for T-Mobile US and Verizon Communications as well.
Verizon reports on April 25. while T-Mobile follows on April 27.
"We expect AT&T's wireless subscriber growth to remain strong as the company maintains its focus on retention and using handset promotions to attract new customers," BofA's Barden went on to say. "Coupled with subscriber growth, we expect service revenue growth of 5.7% year-over-year to $15.6 billion, in-line with consensus."
On the stock market today, T stock edged down 0.6% to close at 19.70.
Heading into the AT&T earnings report, T stock owned a Relative Strength Rating of 76 out of a best-possible 99, according to IBD Stock Checkup.
AT&T Earnings: Free Cash Flow Key
For fiscal 2023, AT&T predicts free cash flow of $16 billion. Meanwhile, free-cash-flow growth supports AT&T's dividend.
"We project T can outpace conservative expectations for subscriber growth in 2023 given strength we see in Q1," Wells Fargo analyst Eric Luebchow said in his note to clients. "We see upside to the $16 billion FCF bogey or guide for 2023. Wireless service revenue growth should be best-in-class as the only operator to grow subscribers, average revenue per user and EBITDA (earnings before interest, taxes, depreciation and amortization) across its wireless business."
The T stock analyst added: "The biggest 'moving' part will be AT&T's ability to deliver $1 billion to 1.5 billion of organic EBITDA growth."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
