AT&T Earnings Preview: Second Quarter 2009

AT&T [[T]] is scheduled to report their second quarter 2009 results before the market opens on Thursday, July 23. Based on our analysis, we at are expecting AT&T to report slightly better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $30.84 billion and EPS of $.52. This would represent essentially flat revenues from last year’s $30.87 billion in the same period. The current analyst consensus estimates calls for revenues of $30.69 billion and EPS of $0.51.


If flat is the new growth, then investors should like AT&T. The company continues to benefit from the popularity of Apple’s iPhone. The newly released 3G S iPhone appears to have helped sales in June, but is likely to negatively impact margins. However, enterprise sales continue to suffer as businesses have cut budgets and are likely delaying upgrades until 2010.


While topline growth is expected to be stagnant in 2009 and again next year, investors should like AT&T high dividend yield. The current yield now stands at 7% and the dividend appears to be quite safe. However, the company needs enterprise spending to pick up in order to provide a catalyst for growth.


Share Performance

Since the beginning of the year, AT&T’s shares have fallen nearly 17%. In 2008, AT&T’s shares dropped 31% as the stock fell in step with the 34% decline in the Dow Jones industrial average.



Shares are now trading at 11x consensus 2010 EPS estimates. This is a slight discount to the relative valuations of their peer group. As the highest yielding stock in the Dow Jones industrial average, we would recommend AT&T to passive income investors and see limited downside in the stock in the near term.


Recommendation: Buy with a $30 price target.


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