AT&T Inc. (NYSE:T) may be one of the biggest surprise winners this earnings season. As we head into the meat of earnings season, a whole bunch of companies are reporting quarterly numbers. Like always, some stocks are going down. And some stocks are going up. But I don’t think anyone expected T stock would be going up like this.

Given the relatively stable state of the AT&T’s business, the inherently low growth rates, and the big dividend, T stock normally isn’t a big earnings mover.

But T stock is bouncing more than 4% higher as of this writing. That makes it a bigger earnings winner than stock market beauty Facebook Inc (NASDAQ:FB).

Why the huge move higher? It was a clean beat-and-raise quarter which underscored strength in the company’s important growth segments and outlined just how much the company stands to benefit from tax reform.

In other words, there wasn’t anything not to like about the quarter.

But there is a lot to like about T stock at these levels.

Strong Quarter Underscores Growth Where It Matters

AT&T reported a really good quarter that checked off all of the boxes for investors: steady growth, strong outlook, and big tax reform benefits.

The legacy wireline and domestic video business continues to struggle. But we all knew this was coming. Just look at the recent results for Netflix, Inc. (NASDAQ:NFLX). That over-the-top streaming giant doesn’t operate on an island. If domestic subscriber growth is picking up over there, then that means churn in AT&T’s legacy video business is also picking up.

But revenues declined less than half of a percent despite that massive headwind. That is because the rest of AT&T’s business is picking up steam.

Firstly, T has a strong hedge against cord cutting thanks to DirecTV NOW, their very own over-the-top service which is gaining momentum. AT&T added 368,000 DirecTV NOW subs in the quarter. That is far faster that last quarter’s 300,000 pace, illustrating that demand for this service is only ramping with cord cutting accelerating.

DirecTV NOW now boasts 1.2 million subs. Granted, that is a fraction of the company’s total video customer base, but the hope is that as customers cut the cord, some (or most) of them will transition to DirecTV NOW. Indeed, this is clearly happening according to the investor briefing:

“Total video subscribers grew by 161,000 in the quarter as DIRECTV NOW subscribers more than offset traditional video declines.”

This cord-cutting conversion to DirectTV NOW could pick up even more steam thanks to the repeal of net neutrality. AT&T can influence cord-cutters to DirecTV NOW by giving it higher speeds than peer services, thereby growing its value prop. In such a world, DirecTV NOW could see explosive growth.

Secondly, the wireless business is improving with great pace. T recorded 4.1 million wireless net adds in the fourth quarter, better than last quarter (3 million) and the quarter before that (2.8 million). Meanwhile, the company continues to post record-lows in total postpaid churn. Wireless margins weren’t great in the quarter, but the company has reported record high Wireless margins in each of the last four quarters. The downturn this quarter was more of a reinvestment thing with tax reform on the horizon than anything else.

Broadly speaking, then, in the wireless business, net adds are up, churn is at record lows, and margins are at record highs.

Thirdly, the company is set to win big thanks to tax reform. We are talking $1 billion in incremental capital investment in 2018, an earnings jump from $3.05 in 2017 to $3.50 in 2018, and a free cash flow surge from $17.6 billion to $21 billion.

Bottom Line on T Stock

Put it all together, and you have a company that is offsetting its biggest headwind by growing an over-the-top video business, experiencing record high growth in its wireless business, and set to hugely benefit from tax reform.

That makes T stock a winner for 2018.

Earnings this year are expected to be $3.50 per share. The average forward multiple for T stock over the past 5 years has been 13. That average 13 multiple on $3.50 forward estimates gets you to a price target of $45.50 for T stock.

I think that is where the stock trends over the course of the next several months. The recent quarterly numbers will be the fuel which charges that rally.

As of this writing, Luke Lango was long T.