AT&T Inc. (NYSE:T) shares are trading higher after the company updated its 2024 guidance and disclosed its long-term strategy.
Strategy Update: AT&T is modernizing its 5G wireless network, aiming to complete the transition to open, high-capacity technology by 2027. The network, with deep mid-band 5G spectrum, will cover over 300 million people by the end of 2026.
In broadband, AT&T is expanding its already largest fiber network in the U.S., planning to reach over 50 million locations by 2029.
At the same time, the company is working to exit its legacy copper network operations across most of its wireline footprint by the end of 2029.
2024 Guidance: The company now sees adjusted EPS of $2.20 – $2.25 compared to the street view of $2.21 (vs. prior outlook of $2.15 – $2.25).
Also, the company expects wireless service revenue to grow by 3% range and broadband to grow by over 7%.
Moreover, the company projects adjusted EBITDA growth in the 3% range, capital investment at the high-end of the $21 billion to $22 billion range, and free cash flow in the $17 billion – $18 billion range in FY24.
This includes an expected adjusted equity in net income from DIRECTV of approximately $0.30 per share post-tax. When excluding this, the company expects adjusted EPS of $1.90 – $1.95.
Long-Term Outlook: AT&T has set its financial targets for 2025-2027, excluding earnings and cash flows from DIRECTV following the expected sale of its 70% stake in DIRECTV to TPG by mid-2025.
The company expects $5.4 billion in after-tax cash from the DIRECTV sale in 2025 and $0.5 billion in 2029.
AT&T expects its plan to generate over $50 billion in financial capacity over the next three years, primarily through organic growth.
The company forecasts low single-digit annual growth in service revenue, with Mobility service revenue increasing 2%-3% annually and consumer fiber broadband growing in the mid-teens.
AT&T plans $22 billion in annual capital investment from 2025-2027, with free cash flow (excluding DIRECTV) reaching $16 billion in 2025, growing by $1 billion annually to over $18 billion by 2027.
The company sees adjusted EPS (excluding DIRECTV) of $1.97-$2.07 in 2025 (vs. estimate of 2.24), with double-digit growth by 2027.
The company expects to achieve cost savings of $3 billion and free cash flow of over $18 billion by 2027.
AT&T’s plan includes $10 billion in additional flexibility for strategic investments, debt reduction, or further capital returns.
Buyback & Dividend: The Board has authorized an initial $10 billion for share repurchases, set to begin once the net leverage target is reached and complete by 2026.
The company expects another $10 billion in repurchases in 2027, pending Board approval.
The company plans to return over $40 billion to shareholders via dividends and share repurchases, maintaining its $1.11 per share annual dividend, totaling $20 billion in dividends and $20 billion in repurchases from 2025-2027.
Investors can gain exposure to the stock via iShares U.S. Telecommunications ETF (BATS:IYZ) and Simplify Exchange Traded Funds Simplify Next Intangible Value Index ETF (BATS:NXTV).
Price Action: T shares are up 2.91% at $23.36 premarket at the last check Tuesday.
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