AT&T Earnings Preview: Third Quarter 2009

AT&T [[T]] is scheduled to report their third quarter 2009 results before the market opens on Thursday, October 22. Based on our analysis, we at are expecting AT&T to report better than expected quarterly results that will exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $30.90 billion and EPS of $.51. This would represent a 1% decline in revenues from last year’s $31.34 billion in the same period. The current analyst consensus estimates calls for revenues of $30.87 billion and EPS of $.50.


AT&T is poised for another quarter of virtually no growth. The company’s wireless segment continues to show strong growth particularly with their exclusive relationship with Apple [[AAPL]] as the sole service provider for the increasingly popular iPhone. However, we believe that AT&T’s days as the exclusive service provider for the Apple iPhone may be numbered.


AT&T’s stock price has remained virtually unchanged this year as the company offers investors no growth, but an impressive 6.4% dividend yield is certainly attractive to income investors. For AT&T’s stock to break out of its current narrow trading range, the company will have to demonstrate that enterprise sales are recovering. We expect that recovery probably won’t happen until next year.


Share Performance

Since the beginning of the year, AT&T’s shares have fallen over 3%. In 2008, AT&T’s shares fell 28% but still outperformed the 34% decline in the Dow Jones industrial average.



Shares are now trading at 11.6x consensus 2010 EPS estimates. This is inline with the relative valuations of their peer group. AT&T’s high dividend yield and limited downside continues to make this stock attractive to investors. A recovery in enterprise spending in 2010 could lift this stock above $30.


Recommendation: Buy with a $30 price target


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