AT&T T is scheduled to release its Q1 fiscal 2020 earnings results on Wednesday, April 22. Wall Street will be watching the telecom giant closely after it canceled its previously planned accelerated-share-repurchase plan amid the coronavirus economic downturn.
What’s Going On?
AT&T announced in March that canceled its $4 billion ASR, which was planned for 2Q, “and stopped all share repurchases.” The move should help AT&T maintain its dividend payout as companies around the world figure out how to navigate the coronavirus-induced economic fallout, which clearly seems like a prudent plan.
Shares of AT&T have underperformed wireless rival Verizon VZ over the last serval years because investors seem worried about the company possibly over extending itself. This was made clear by the deal AT&T reached with activist investor Elliott Management in October 2019 to commit to further cost-cutting measures and stock buybacks, as it continues to pay down its debt.
Potential Coronavirus Impact
AT&T’s wireless and broadband segments should be able to weather the coronavirus storm since people would likely look to other cost-saving measures way before cutting back on these essentials, especially with people stuck at home—although its business unit could take a hit. The company has already been shedding DirectTV customers as more people cut the cord. So clearly this trend could get worse.
Plus, WarnerMedia’s box office schedule is likely messed up for some time due to release delays. Meanwhile, TNT and TBS could take hits since March Madness was canceled and lives sports aren’t likely to return to TV soon. Luckily its cable news network CNN is likely helping pick up some of the slack.
AT&T is also set to roll out its new HBO Max streaming TV service in May to compete against Netflix (NASDAQ:NFLX) NFLX, Disney DIS, Amazon AMZN, Apple AAPL, and others in the future of entertainment. And AT&T is in the midst of its 5G efforts, as it competes to offer the most robust next-generation of wireless service alongside Verizon and the newly merged T-Mobile TMUS and Sprint.
Other Fundamentals
AT&T stock is down roughly 23% in the last three years, against VZ’s 18% climb and the S&P 500’s 20% expansion. More recently, T shares have fallen 21% in 2020 and have not bounced back nearly as much as the broader market since March 23.
The company’s falling stock price has boosted AT&T’s dividend yield to 6.7%. This easily tops Verizon’s 4.2%, the S&P 500’s 2.1%, and is one of the stronger yields among tech/telecom firms. AT&T also boasts “B” grades for Value and Growth in our Style Scores system, while its industry rests in the top 9% of our more than 250 Zacks industries.
Bottom Line
Our current Zacks Estimates call for AT&T’s Q1 sales to slip 1.2% from the year-ago period to $44.27 billion. Meanwhile, AT&T’s adjusted first quarter earnings are projected to dip 1.16% to hit $0.85 a share. Peeking ahead, its full-year fiscal 2020 revenue is projected to sink 1.5%, with its EPS figure expected to fall 3.6%.
The nearby graphic also shows that AT&T’s earnings revisions have trended downturn recently, which helps the stock hold a Zacks Rank #3 (Hold) at the moment. Some investors want to buy AT&T stock, which is trading at roughly $31 a share, for its dividend yield and for its longer-term 5G and streaming entrainment outlook.
However, given the current market uncertainty, it might be best to wait for AT&T’s actual results and more importantly its guidance.
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