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AT&T Stock Price Rose 20% YTD, More Upside is Ahead

After experiencing substantial losses in the last two years, AT&T (NYSE: T) stock price rose 20% since the start of this year. Its shares are currently trading around $35 – the highest level in the last 52-weeks. The upside momentum in share price is supported by significant expansion in free cash flows.

T AT&T Inc. weekly Stock Chart

On the negative side, the company has reported lower than expected results for the second quarter of fiscal 2019. It experienced a substantial decline in subscribers in Q2.

The subscriber base for DirecTV declined 168K in the latest quarter while its Pay-TV subscribers plunged 778K compared to the past year quarter. In addition, its wireless postpaid net adds dropped 154K in Q2 compared to the consensus estimate for the decline of 40,250.

The U.S. video net adds plunged 946K relative to the estimate for -586,100. It’s Broadband net ads also dropped by 34K when analysts were expecting the growth of 76K.

Despite the notable drop in subscribers, the company has generated 15% Y/Y revenue growth in the second quarter. The growth in revenues was only due to Time Warner acquisition. Its earnings, however, declined to $0.89 per share compared to earnings of $0.91 per share in the past year period.

On top, the company generated solid free cash flows which were more than enough to cover dividend payments. Its free cash flow was standing close to $8.8 billion compared to dividend payments of $3.3 billion. After dividend payments, the company was left with more than $5 billion in free cash flows – which they can use for share buybacks and debt reduction.

Randall Stephenson, AT&T chairman, and CEO said, “We continue to pay down debt and are more confident than ever that we’ll meet our year-end deleveraging goal, and we’ll take a look at buying back stock.”

The company expects to generate mid-single-digit earnings growth in fiscal 2019. The operating cash flows are expected to hit $38 billion this year. Overall, AT&T stock price is likely to receive support from robust growth in financial numbers, dividends, and share buybacks.

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siraj sarwar

Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.
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