Summary
- The management team at AT&T announced financial results for the third quarter of the conglomerate's 2020 fiscal year.
- There were some bad spots for the business, but on the whole, investors should be incredibly pleased.
- This is especially true when you consider how great the revision higher to free cash flow is looking for the enterprise.
- Now might be a great time to consider loading up on the company if you plan to hold it for the long run.
- Looking for a helping hand in the market? Members of Crude Value Insights get exclusive ideas and guidance to navigate any climate. Get started today »
Few firms are as interesting to analyze in the current environment as telecommunications and entertainment giant AT&T (NYSE:T). Not only do you have the impact associated with the current COVID-19 pandemic affecting the firm, as it is affecting other firms as well, but you also have a conglomerate that the sum of both good parts and bad parts. These are individual businesses, and they really do fit mostly into two different categories: the ones that are robust growth machines for AT&T and its shareholders, and ones that are already in a steady state of permanent decline. Fortunately, for shareholders, what we saw during this latest quarter's release was the good side of the firm win out. And by a large margin at that. Strong cash flows, continued progress on developing its growth-oriented enterprises, and management's push to lower debt (however slowly) are all having a positive impact on the business.
A slew of good news
By most accounts, the latest quarter for AT&T was an upbeat one. For starters, let's begin with one of my favorite pieces of the business: its Connected Devices operations. Connected Devices, as I have written about before, are a play on the firm's 5G business and on the entire IoT (Internet of Things) societal shift. This underappreciated subsegment of the firm has done phenomenally well in recent years. Consider, though, its recent performance. In the third quarter this year, Connected Devices reported 75.967 million subscribers. This is up 22% from the 62.288 million subscribers reported the same quarter last year. It's also up 5.9%, or 4.205 million subscribers compared to the 71.762 million subscribers seen in the second quarter this year. To put this performance in perspective, consider that this quarter-over-quarter growth nominally was nearly double the 2.255 million net adds the company saw from the first quarter this year through the second quarter.
In some other areas, AT&T fared quite well. First, we have the issue of debt. Net debt during the quarter came in at $149.12 billion. This is down $2.90 billion from the $152.02 billion the company had on its books as of the end of its second quarter this year. Though this progress may not seem like much, it ignores some activities the company has engaged in. In particular, we have the firm's sale of its stake in Central European Media Enterprises, which should bring in about $1.1 billion in cash. It will also reduce the firm's exposure to the entity's debt by $575 million. All of this occurred after the end of the third quarter, so it should further reduce net debt.
