Zinger Key Points
- AT&T posted 3% wireless service revenue growth, despite a Y/Y decline in postpaid phone net adds.
- The company’s revenue growth is likely to turn positive in FY25.
AT&T Inc T reported upbeat fourth-quarter revenues and earnings on Monday, and analysts quickly provided their commentary.
- Scotiabank analyst Maher Yaghi reiterated a Sector Outperform rating, while raising the price target from $24 to $26.
- RBC Capital Markets analyst Jonathan Atkin reaffirmed an Outperform rating, while lifting the price target from $26 to $27.
- Oppenheimer analyst Timothy Horan maintained an Outperform rating and price target of $27.
- Raymond James analyst Frank Louthan reaffirmed a Strong Buy rating and price target of $28.
Check out other analyst stock ratings.
Scotiabank: AT&T reported 482,000 postpaid phone net additions. That’s down from 526,000 in the prior year. Yaghi saw “continued strength in other wireless KPIs including stable postpaid phone churn of 0.85% and ARPU growth of 0.9%.” These factors led the company to post a 3% growth in wireless service revenues, he added.
U.S. volumes are likely to continue normalizing in 2025. Yaghi expects "pricing actions, adoption of higher-priced plans, and the expansion of convergence” to boost ARPU (average revenue per user).
"While the company will be facing a material increase in cash taxes in 2025 and is still spending a significant amount on fiber and wireless networks, organic growth is large enough to offset those headwinds providing the company with a path to grow FCF/share in 2025," he added.
RBC Capital Markets: AT&T's consolidated revenues grew by 0.9% year-on-year to $32.3 billion. That’s slightly higher than the consensus of $32.1 billion. Higher wireless equipment revenues and business wireline drove the beat. The company's adjusted earnings of 54 cents per share exceeded Street's expectation of 49 cents per share.
Management guided to an increase in cash taxes by $1.5 billion year-on-year to $3.3 billion, while free cash flows are expected to benefit from "lower interest expense and working capital," Atkin said. "Management expects adj. EPS to be pressured by higher depreciation and amortization y/y, while anticipated buybacks in 2H25 will not have an impact on adj. EPS," he further wrote.
Oppenheimer: AT&T delivered "another solid quarter," with higher-than-expected revenue growth and earnings, Horan said. The company's performance was driven by strong operating expense management, broadband growth, and "restructuring to focus on pure connectivity," he added.
"The company executed against all its FY24 targets, which has been an issue the past few years, while management indicated a clear path to repeat this in 2025," the analyst stated. AT&T's annual revenue growth is likely to inflect back to positive in fiscal 2025, and there is likely to be "a modest acceleration in EBITDA growth on improved cost-saving measures," he further wrote.
Raymond James: AT&T executed a "strong finish" to the year, with results at or above their guidance, Louthan said. "AT&T Fiber reached 40% penetration in both homes passed with fiber and the percentage of fiber customers bundling wireless," he added.
AT&T is "our best large cap total return story over the next 12 months," the analyst wrote. Wireless growth and higher free cash flows "should bring investors back to the name," he further stated.
Price Action: Shares of AT&T had declined by 0.56% to $24.02 at the time of publication on Tuesday.
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