AT&T Inc. (Ticker: T) shares fell almost 11% after releasing its earnings today, Thursday before the market opened. The sharpest drop in share price over the last decade.
Disclaimer - Nothing in this post is financial advise
AT&T said they are decreasing full-year free cash flow guidance to the $14 billion range. This is mainly caused by delayed bill payments, which will hurt the cash flow for the rest of the year.
The forecast raised concerns that consumers are pulling back on spending while facing decades-high inflation pressure. Part of that pressure is of course that consumer bills are getting more and more expensive.
AT&T also increased prices by $6 a line on older mobile plans in May.
It seems like the market didn't like the cut in the forecast. Ignoring the fact that the second-quarter results topped estimates for profit:
AT&T posted $29.6 billion in revenue in the second quarter, beating analysts' expectations of $29.56 billion.
Adjust EPS of 65 cents per share beat Wallstreet's expectations of 61 cents per share.
AT&T beating analysts' expectation
The company posts more than 800,000 postpaid phone net adds for the best second quarter in over a decade, more than 300,000 AT&T Fiber net adds. Smashing analysts' average estimates of 554,000 and giving the company a total of 6.6 million fiber customers.
A continued increase in Mobility customers
AT&T highlighted that it continues to see record levels of customer additions. The company already achieved its end-of-year target of covering 70 million people with the mid-band 5G spectrum and is on track to approach 100 million people with the mid-band 5G spectrum by the end of the year.
First Quarter without its streaming business
2Q22 was also the first full quarter after AT&T spun off its media and streaming business to Warner Bros. Discovery Inc. So it could focus exclusively on wireless and broadband growth, which could explain the massive increase in growth.
Disclaimer - Nothing in this post is financial advise
Bottom Line
AT&T posted solid earnings, especially when considering the current economic environment. The decline in share price could offer a great buying opportunity for investors since the initial drop in share price seems to be an overreaction. The shares of AT&T are already trading at a PE Ratio of 7, which is low compared to its rivals Verizon Communications Inc. (Ticker: VZ) with a current PE Ratio of 9 and T-Mobile US, Inc. (Ticker: TMUS) with a PE Ratio of 58.
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