Things are looking pretty dicy to say the least in the telecom sector. So far this year, we’ve seen the broader market hit high point after high point, but the telecommunications sector has been struggling to keep up as price wars and uncertainty turn investors away from the industry.
However, even as the sector continues to face headwinds, AT&T Inc. (NYSE:T) looks like a good buy ahead of its earnings release on Tuesday. AT&T stock offers a steady income stream, a strong position within the industry and an increasingly diverse business that may start to depend less and less on wireless customers.
Investors who have been considering T stock for some time should add the stock to their portfolios while it’s trading near its 52-week low, because a strong earnings report could send the stock even higher.
AT&T Earnings: What You Need to Know
This week, AT&T stock could see its share price pop even if the firm simply meets Wall Street’s expectations. The company is expected to report $0.74 per share on revenue of $39.86 billion. At the moment, T stock is trading at just $36.30 per share and I’d be willing to bet that as long as the firm’s results aren’t a disaster, the stock will make its way higher.
AT&T earnings, even if they don’t dazzle, are unlikely to hold a downside surprise. T stock was hit hard in Q1 by the wireless wars, which surprised investors and sent the stock on a spiral, but now that investors have had some time to digest the state of the telecom space, a shock like that one is unlikely.
For one, AT&T CEO Randall Stephenson is likely to give investors some news regarding the Time Warner Inc (NYSE:TWX) merger, which would be a positive for the company. Most are expecting to see the deal to be complete within the next few months, so Stephenson’s rhetoric regarding the merge is likely to be positive and could improve sentiment on T stock.
The TWX merge is a big deal for AT&T stock because it will bring the firm’s content costs down substantially and help the firm improve its value proposition to customers. Not only that, but it will be a big step forward in AT&T’s efforts to transform itself into more than just a wireless carrier.
Speaking of which, T’s moves into new industries are another reason to consider choosing the stock over some of its peers. AT&T has been working to diversify by making moves into the connected car space, cloud computing and even drone technology. That’s on top of T’s strategic acquisitions which will give the firm surer footing in the media space.
Bottom Line on T Stock
At the moment, AT&T’s P/E ratio is just 17.85, suggesting that the majority of traders aren’t willing to pay much of a premium for the stock. However, I believe AT&T stock is underrated when you consider its solid positioning and lofty future plans.
Not only does T appear to be poised to weather the telecom storm, but the firm will be rewarding investors that stick with it through a hefty 5.4% dividend yield. What’s not to love about that?
T stock will probably make its way higher following the AT&T earnings release. There’s a chance that the firm will report disastrous results, which could send the stock even lower, but that chance is slim. Investors are already expecting very little from the stock, so it’s more likely that the firm will surprise in a good way.
With its share price so heavily depressed, even an uneventful release will likely take the stock higher, making right now a good time to add AT&T stock to your portfolio.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.