Earnings Blowout Reminds Investors of AT&T’s Enduring Value

Sometimes it feels like modern investors are focusing so much on flashy, fast-moving stocks that they’re ignoring tried-and-true names like AT&T (NYSE:T). That’s unfortunate, as T stock could be a veritable cash cow for patient long-term shareholders.

Image of AT&T (T) logo on a gray storefront
Source: Jonathan Weiss/Shutterstock

I like to call AT&T shares a “generational investment” because you can buy the stock, hold it for decades, and collect income through the generous dividend payments. You can even pass the shares on to your grown children someday.

The problem is that it’s hard to convince people of the true value of T stock. After all, the share price is lower today that it was five years ago.

So, is AT&T ready for a rebound? Hopefully, today we can discover some reasons to keep the faith and stay the course with this classic American telecom icon.

A Closer Look at T Stock

Maybe someday, T stock will get back to the $50+ level, where it was in the year 2000. Those were good times, but they’re a distant memory now.

Today, the bulls need to set realistic goals for AT&T. For example, the shares reached a 52-week high of $33.24 in June of 2020. At the very least, they should be able to get above that level and stay there.

It’s not an impossible mission, by any means. At the close of the markets on Apr. 26, T stock settled at $30.91. So really, there should be no problem achieving fresh 52-week highs in the near future.

Next, I’d like to give you some good news and some bad news. First, the good news: AT&T is still a terrific dividend payer, as the shareholders will earn a forward annual dividend yield of 6.63%.

The bad news is that AT&T’s trailing 12-month earnings per share is -34 cents. I suppose that we can forgive the company for having negative earnings on a per-share basis during the Covid-19 pandemic.

Nevertheless, the investors will definitely want to see that number turn positive in 2021.

The Big Picture Looks Great

In order for AT&T to continue pay out its generous dividend yield, it’s important for the company to generate strong revenues.

I’m happy to report that, according to the most recently reported data, AT&T is doing just fine in that department.

For the first quarter of 2021, the company recorded $43.9 billion in revenues. On a year-over-year basis, that represents a 2.7% improvement. It also beat Wall Street’s expectation of $42.7 billion in quarterly revenues.

Focusing now on the bottom line, the analysts were projecting that AT&T would post first-quarter earnings of 78 cents per share. As it turns out, the actual result was 86 cents per share.

That number exceeds not only Wall Street’s expectation, but also the 84 cents per share earned during the year-ago quarter.

Drilling Down to the Details

So now, we can see how the bigger picture looks quite good for AT&T. Yet, things only seem to get better when we zoom in on the fiscal details.

Around the time of the earnings data release, AT&T CEO John Stankey commented, “We continued to excel in growing customer relationships in our market focus areas of mobility, fiber, and HBO Max.”

It’s the HBO Max part that impressed me the most. Reportedly, AT&T added 2.7 million domestic subscribers for the HBO Max service during 2021’s first quarter.

As of Mar. 31, AT&T had a total of 44.2 million HBO Max streaming subscribers. Clearly, folks are still willing to consume streaming content even after the Covid-19 lockdowns are being lifted.

While we’re on the subject of impressive details, check this one out. Evidently, AT&T added 595,000 post-paid wireless phone customers during the fourth quarter.

That’s an outstanding result when compared to the estimate of a 216,000 gain.

The Bottom Line

With the results that I’ve described today, it’s hard to imagine that T stock will stay below its short-term peak price for too much longer.

And as for the long-term, all-time highs are a definite possibility. In the meantime, feel free to sit back and collect those juicy dividends.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2021/04/earnings-blowout-reminds-investors-of-t-stocks-enduring-value/.

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