AT&T stock (NYSE:T) rose 8% on Oct. 20 after the telecom giant released its third-quarter earnings report. Its revenue from ongoing operations fell 4% year on year to $30.0 billion, yet it still outperformed analysts’ estimates by $140 million.
The company’s adjusted profits from continuing operations climbed by 3% to $0.68 per share, above the average estimate by seven cents. Those headline figures show that AT&T’s business is stabilizing after the divestitures of DirecTV and WarnerMedia. But, after losing roughly a fifth of its value in the previous three months, is AT&T stock (NYSE:T) now poised to recover?
How Quickly Is the New AT&T Expanding?
AT&T has now reported three-quarters of its performance as a separate entity. Its mobility division, which includes its primary cellular sector and produced 70% of its sales in the third quarter, has steadily increased postpaid phone customers and revenue over the last year. It has also kept its clients with a low churn rate of less than 1% while its wireless EBITDA margins have been increasing sequentially.
However, AT&T’s business and consumer wireline categories, which account for the remaining 30% of revenue, are a little more complicated. Its corporate wireline revenue has been dropping throughout the year, owing to lower demand for its legacy voice and data services (particularly among government customers), while consumer wireline revenue has increased somewhat.
AT&T has been developing its consumer-oriented fiber network to counteract the delay. This expansion increased overall broadband net additions in the first quarter, but that trend has since reversed as non-fiber broadband subscriber losses (excluding DSL) have outpaced fiber business growth.
AT&T Stock: A Steady Outlook for the Remainder of the Year
AT&T intends to quickly build its 5G and fiber networks in the next years to compensate for the slower growth of its traditional landline operations. These initiatives will account for the majority of the company’s $24 billion in capital investments this year.
For the foreseeable future, AT&T stock (NYSE:T) anticipates the strength of its core cellular business to compensate for shortcomings. It now expects adjusted EPS from continuing operations to be $2.50 “or higher” for the full year, up from $2.42 to $2.46 before. AT&T’s stock (NYSE:T) appears dirt cheap at seven times this year’s profits based on those projections.
Because of its cheap valuation and strong dividend, AT&T stock should be a safe bear market investment for cautious investors. Suppose its cellular business continues to thrive and its landline business stabilizes. In that case, shares might rise again as value investors give the slimmed-down AT&T another opportunity.
Featured Image- Unsplash @ Rubaitul Azad
Author Okoro Chinedu 
