Shares of AT&T (NYSE:T) started his own Increase on Wednesday to 6.2% after fourth-quarter results beat profitability expectations and the communications company offered a free cash flow outlook largely in line with forecasts.
Wednesday it marked AT&T’s best one-day gain since Oct. 20 and pushed the stock to its highest point since last July.
Normalized earnings per share of $0.61 beat expectations by 4 cents, and revenue was up slightly from last year.
The company added 656,000 postpaid phone network additions, once again beating rival Verizon ( VZ ) but trailing subscriber addition leader T-Mobile ( TMUS ). AT&T’s number beat analysts’ expectations, though it was down slightly from 708,000 postpaid phone networks in the third quarter.
According to analysts, AT&T’s 2023 guidance provided a much-needed reset. The company expects wireless revenue to grow at least 4% and broadband revenue to grow more than 5%, though it expects adjusted earnings per share of $2.35 to $2.45, versus analysts’ expectations of $2.56.
After hitting $14 billion in free cash flow in 2022, the company pointed to at least $16 billion in 2023, which largely met the analyst consensus. And CEO John Stankey said AT&T is still on track to cut costs by about $6 billion this year.
That guidance was in line with the Street and “could serve as a clearing event of sorts,” suggested RBC Capital Markets. Uncertainty grew over what AT&T might say about free cash flow.
Such a “reset” of guidance may support the stock rally in the near term when combined with quarterly results, Citi analyst Michael Rollins said. Results were “broadly solid” with “a balance of strategic volume growth and financial performance.”
That reflects “the greater number of levers AT&T can continue to pull to improve financial results in 2023 across a range of postpaid wireless and home broadband industry growth scenarios,” Rollins said.
As for the ongoing “erosion” of business revenues, that “is not surprising and likely reflects the secular tailwinds of legacy services more than a barometer for the macroeconomic backdrop.”
“Turning to 2023, what is our strategy?” CEO John Stankey said on the company’s earnings call. “Well, it’s simple. Do it again. What exactly does that mean? It means we’re focused on the same three operational and business priorities we set 2.5 years ago.”
“As I’ve mentioned many times, our North Star remains solely focused on becoming the best provider of 5G and fiber connectivity,” he said.
This includes selectively targeting under-penetrated areas in both consumer and business, and continuing the rollout of 5G (towards reaching more than 200 million people with medium-band 5G by the end of the year), as well as monitoring “healthy” growth in the number of subscribers in wired broadband as the fiber footprint grows .
See the Seeking Alpha AT&T earnings call transcript for more details.