AT&T stock falls as Telecom lowers free cash flow outlook

AT&T stock fell on Thursday after the telecommunications company added more postpaid wireless phone subscribers than expected in the June quarter, but lowered its free cash flow outlook for the entire year. The T-stock selloff eased in afternoon trading.


AT&T’s revenues excluded WarnerMedia, which spun off in early April, and DirecTV. AT&T (T) said second-quarter adjusted profit from continuing operations was 65 cents, down 11% from a year earlier. Revenue from T shares fell 17% to $29.6 billion.

Analysts had forecast AT&T earnings of 61 cents a share on revenue of $29.5 billion, according to FactSet. A year earlier, AT&T stock gained 73 cents per share on revenue of $44 billion. AT&T said its adjusted profit from standalone operations alone — excluding WarnerMedia and DirecTV units — was 64 cents a year earlier.

AT&T stock fell 7.2% to 19.01 in midday trading on the stock market today.

AT&T stock: outlook for free cash flow lowered

Additionally, AT&T said it added 813,000 postpaid wireless phone customers from estimates for a gain of 562,000. AT&T’s wireless revenue climbed 5.2% to 19.9 billion against estimates of $19.7 billion.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 2.5% to $8.2 billion.

Free cash flow from continuing operations in the second quarter was $1.4 billion amid higher capital spending, the company said. This missed consensus estimates of $4.62 billion in FCF.

“Free cash flow of just $1.4 billion was a very big miss for the second straight quarter, being 70% below consensus,” MoffettNathanson analyst Craig Moffett said in a report.

AT&T lowered its free cash flow forecast for the full year to a range of $14 billion from $16 billion.

In its earnings release, AT&T said, “This outlook reflects the expectation of lower device vendor payments of more than $3 billion, approximately $2 billion of lower capital investments , benefits from customer growth in the first half, which include recent price increases, and lower cash interest payments.”

AT&T added, “We expect these benefits to be partially offset by reduced DirecTV distributions and our expectation of additional cash-out pressure.”

T stock up in 2022

AT&T stock had climbed 10% in 2022 before the earnings report.

Heading into AT&T’s earnings report, the telecom stock had a relative strength rating of 91, according to IBD Stock Checkup. Additionally, the T stock had approached an entry point of 21.49 from a cup base with handle.

WarnerMedia merged with Discovery in early April. The new media company is called Discovery of Warner Bros. (WBD).

AT&T cut its annual dividend by 46% to $1.11 per share due to the WarnerMedia spin-off. Yet AT&T offers a dividend yield of 5.43%.

“Management has not committed to any specific dividend actions going forward, including reporting to the board any future dividend growth, which we believe is the most critical aspect,” said Frank Louthan, an analyst at Raymond James, in a report. “We remain hopeful of a symbolic dividend increase, with buybacks also possible. We expect more clarity on this before the end of the year.”

Additionally, AT&T divested DirecTV to TPG Capital in August 2021.

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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.


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