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Investors Frown as AT&T Lowers Cash Flow Guidance for 2022

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Even after reporting better-than-expected earnings for the second quarter of 2022, T stock closed 7.6% down on Thursday at $18.92. 

Shares of telecommunications company AT&T, Inc. (NYSE: T) closed 7.6% lower on Thursday after the company lowered its free cash flow guidance for full-year 2022. Further, the company’s second-quarter results beat analyst expectations but came in lower than the previous year.

Adjusted earnings stood at $0.65 per share, higher than the Street’s estimate of $0.61 per share but lower than the year-ago figure of $0.73 per share.

Revenues totaled $29.6 billion, down 17.1% year-over-year, primarily due to the separation of the U.S. Video business in the third quarter of last year and divestment of other businesses.

Mobility revenues grew 5.2% year-over-year to almost $20 billion as a result of higher equipment and service revenues. Total net adds stood at 6.6 million.

Revenues of the Business Wireline segment slipped 7.6% to $5.6 billion. A fall in demand for legacy voice and data services led to the decline.

Consumer Wireline revenues jumped 1.1% to $3.2 billion, driven by the increased adoption of broadband services, which offset the fall in legacy voice and data services.

CEO’s Take on AT&T’s Q2 Performance

John Stankey, the CEO of AT&T, said, “We’ve already added nearly two million AT&T Fiber locations this year and just reached our target of covering 70 million people with mid-band 5G spectrum two quarters early, with expectations to now approach the 100 million mark by the end of the year.”

“As a result of our higher-than-forecasted customer growth, we’re increasing our Mobility service revenue guidance to 4.5-5% growth for the full year. We’re also decreasing full-year free cash flow guidance to the $14 billion range to reflect heavy investment in growth and working capital impacts related to the timing of collections,” Stankey added,

The Dallas-based company earlier expected full-year free cash flow (FCF) of $16 billion.

Meanwhile, it reported FCF of $1.4 billion for the second quarter and $4.2 billion year-to-date. In the second half of the year, AT&T expects to generate FCF of around $10 billion. It also expects to record cost savings of over $4 billion by the end of 2022.

Analysts Are Cautiously Optimistic about AT&T

Ahead of AT&T’s second-quarter results, Bank of America Securities analyst David Barden reiterated a Buy rating on the stock with a $25 price target (32.1% upside potential).

The analyst said, “The company is a more focused wireless and wireline connectivity provider after a series of divestitures culminating in the early April 2022 spin of WarnerMedia.”

As per TipRanks, the stock has a Moderate Buy consensus rating based on seven Buys and four Holds. T’s average price target of $23.75 reflects upside potential of 25.53% from current levels.

Hedge Funds Are Very Positive on AT&T

TipRanks’ Hedge Fund Trading Activity tool shows that the confidence in AT&T is currently Very Positive, as the cumulative change in holdings across all 34 hedge funds that were active in the last quarter was an increase of 6.1 million shares.

T Stock Could Outperform the Market

T stock scores a “Perfect 10” on TipRanks’ Smart Score rating system. This implies that the stock has strong potential to outperform the market. The company is on track to beat the market as this was its best second quarter in more than 10 years, with postpaid phone net additions of over 800,000 and Fiber net additions exceeding 300,000.

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