AT&T is set to report its Q2 2024 earnings on July 24, with the stock performing reasonably well so far this year, rising by 11% since January. Analysts expect earnings of $0.58 per share, slightly ahead of consensus estimates but below Q2 2023 earnings. Revenues are expected to be flat at $30 billion, with service revenues likely increasing while handset sales could drop due to economic headwinds and lack of new smartphone features.
The focus will be on AT&T’s postpaid phone performance, as the carrier added 349,000 subscribers in Q1 2024, surpassing expectations. Investments in network improvements and mid-band spectrum deployment could support subscriber growth. The company has been investing heavily in 5G and fiber broadband infrastructure, with a focus on open and interoperable platforms. Additionally, the fiber broadband business has shown consistent growth, with an increase in net adds and revenues in Q1.
However, AT&T stock has seen a significant decline of 35% from early 2021, underperforming the S&P 500 over the past three years. Returns for the stock were negative in each of the last three years, while the S&P 500 saw positive returns, indicating underperformance. In contrast, the Trefis High Quality Portfolio, with 30 stocks, has outperformed the S&P 500 each year, suggesting better returns with less risk.
Despite the underperformance, AT&T stock is considered slightly undervalued, trading at 8.5x consensus 2024 earnings and offering a dividend yield of around 6%. The company is expected to drive profits higher in the long term as the costly 5G network build-out nears completion. With wireless data and telecom services deemed essential, AT&T is likely to withstand any economic downturn. The $18 price estimate for AT&T stock is in line with the current market price.
Overall, AT&T’s performance in Q2 will be closely monitored, especially in terms of subscriber growth and revenue trends. The company’s strategic investments in network infrastructure and focus on higher-value plans could drive long-term profitability. Despite past underperformance, there is optimism that AT&T could see a recovery in the future, especially with its position in essential services. Investors will be looking for insights from the Q2 earnings report to determine the stock’s future trajectory.
