AT&T: Stock Looks Healthy After Analyst Day

on Wednesday hosted an Analyst Day event which impressed analysts at Credit Suisse and Buckingham.

Joseph Mastrogiovanni of Credit Suisse commented in a note that AT&T's presentation will serve as a "jumping-off" point for the stock and also "reassures" his bullish thesis on the stock. Mastrogiovanni noted that AT&T's presentation on DirecTV was "promising" despite trends being soft in the second quarter. The analyst added that the benefits of the combined company will "shine over time" and it is common to experience "slack" during a merger process but is now at a point where it should "tighten" given attractive bundles of phone, TV and broadband. Mastrogiovanni also added that AT&T's obligation of deploying the FCC mandated 12.5 million fiber-to-the home initiative over four years within a targeted capital expenditure of 15 percent of revenues being is possible. The analyst stated that the cost of equipment dropped "materially" over the last 10 years while engineering in the home has improved and the company can better target coverage areas than municipalities allowed in the past. Bottom line, the analyst suggested that the company's presentation will also "kick off a series of catalysts" such as raises to synergy guidance, growth in Latin America and upward estimate revisions. Shares remain Outperform rated with an unchanged $40 price target.

James Ratcliffe of The Buckingham Research Group commented in a note that management's tone during the presentation was "positive." Ratcliffe continued that AT&T's outlook doesn't include material revenue upside from cross-selling wireless and DirecTV, nor does it include any benefit from early improvement in U-Verse programming in cases where the DirecTV contract matures first. As, such the analyst now believes the company's $2.5 billion synergy target is "conservative." Ratcliffe further commented AT&T's capital expenditure guidance of $21 billion implies the company is moving to integrate the DirecTV transaction and push expanded fiber coverage. The analyst estimated that the company's spending budget will likely further rise to $25 billion in 2016 and represent 14.9 percent of total estimated revenue. Looking even further, the analyst is expecting AT&T to achieve seven percent earnings per share growth through 2018, driven in part by the DirecTV transaction synergy recognition. In addition, the company's wireless business "remains solid" and could generate 1.5 percent and 2.2 percent topline and EBITDA compounded annual growth, respectively, through 2018. Finally, Ratcliffe pointed out that AT&T's "secure" 5.5 percent dividend yield offers investors downside protection. Shares reman Buy rated with an unchanged $41 price target.