Summary
- The stock seems like it is dropping by the day.
- There are several metrics to watch for when Q3 is reported later this month.
- Once again, the dividend is safe and growing.
- The stock could get a boost if AT&T figures out a way to leverage its streaming services to push theatrical releases which have been delayed.
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- Prepared by Chris, CEO of Quad 7 Capital and Leader of team BAD BEAT Investing
AT&T (T) seems like it is dropping by the day. The more it drops, the more we buy in our long-term dividend growth holdings. But it is getting a bit ridiculous. The market seems to be concerned over delays for theatrical releases for Warner-Media, loss of subscribers for DirecTV, and competition in wireless. It is compounded by the high debt that company has.
But here is the thing. The company is addressing the debt. Theatrical delays are temporary, and they are driving innovation (e.g. new streaming sales) for many companies. There will always be wireless competition, but 5G should be good for all the telecoms we have to tell you. DirecTV has been a headache without question, and we would not mind seeing it sold off. However, it does bring in revenues, even with subscriber cord cutting.
In a few weeks, the company will report its third-quarter earnings and that will be a catalyst. The stock has done nothing but move like a zombie following its highly-anticipated Q2 earnings report. We want to go over the key metrics that you should be watching when Q3 is reported. All things considered, we still love buying the stock in the $20s with a safe dividend that is yielding 7.5%. It will pay off, even if it has been a long few months. Let us discuss
Performance in Q2 and what to watch for in Q3
We are going to discuss a number of metrics that you must watch for when the company reports its Q3 in a few weeks. To understand what to watch for in Q3, we should revisit Q2, not just for the data, but so you know what is important (at least to us). Our firm's Q2 revenue expectations were slightly more conservative relative to the pack. Analysts covering the company were targeting a consensus of $44.15 billion. Overall, we were looking for revenue to decline to about 7-11% or so and to come in somewhere in the $39.3-41.1 billion range.
All that said, revenue hit $40.9 billion at the higher end of the range. Despite a lower than expected top line, the bottom line saw solid performance, much of it from solid expense control, offsetting the revenue miss.
Q3 EPS should come in better than this, but Q2 EPS was down from last year's Q2. It still came in ahead of expectations. The EPS result hit $0.83:
