AT&T Stock Holds Steady After Solid 2Q Results, Reflects Lead-Sheathing Overhang

Raymond James analyst Frank G. Louthan, IV reiterated a Strong Buy with a price target of $25. The re-rating followed the 2Q results. 

He continues to see AT&T as undervalued with upside potential as he sees the wireless growth and FCF ramp as bringing investors back to the name. 

The analyst remained confident in his assessment that the lead-sheathed lines in the network are essentially a non-issue in the near-to-medium term, and the remediation cost is low. He sees AT&T as his best large-cap total return story over the next 12 months. 

Management upheld guidance, and the simplified story continues to drive solid results. He believes the Street should recognize this over the next few quarters, particularly as the additional $2 billion in cost savings materializes. The company continues to ramp toward its target of 30 million locations to pass with FTTP facilities. 

Oppenheimer analyst Timothy Horan had a Perform rating.

T reported 2Q23 revenue of $29.9 billion, up an in-line 0.9% Y/Y. Wireless service revenue grew 4.9% Y/Y in line, but its handset sales were weak like everyone else. EBITDA increased 7% Y/Y to $11.1 billion, beating our $10.6 billion estimate, while margins expanded 210bps on cost reductions and lower marketing/handset promos. 

AT&T hit its $6 billion run rate of annual savings ahead of schedule and plans to build on this with an incremental $2 billion in the next three years. FCF of $4.3 billion was well above his and Street's expectations despite higher Capital Investment and lower DTV contributions. 

AT&T has generated $5.2 billion in FCF YTD as its path to $16 billion becomes more evident on solid EBITDA growth and declining capex. 

Goldman Sachs analyst Brett Feldman maintained AT&T Inc T with a Buy and lowered the price target from $23 to $20.

The analyst maintained estimates following solid 2Q results but lowered the price target to account for lead-sheathing overhang.

Price Action: T shares traded lower by 2.05% at $14.59 on the last check Thursday.

Photo via Wikimedia Commons