AT&T: Poor Business Quality Exposed By Q2 Macro Headwinds
(Preview) Company Update (T US) (Neutral)
Summary
AT&T shares have fallen more than 10% since Q2 results on Thursday and are now at a 7.5x P/E and a 6.0% Dividend Yield.
Q2 results showed the poor quality of its businesses when facing macro challenges. EBITDA was flat and 2022 Free Cash Flow was cut.
Mobility had weak pricing despite high inflation, its EBITDA margin fell and its growth required large CapEx and working capital.
Business Wireline EBITDA is now expected to fall low-double-digits in 2022. Consumer Wireline lost 25k broadband subscribers in Q2.
With the stock at $18.38, while valuation appears superficially attractive, they are outweighed by AT&T’s structural challenges. Avoid.
Introduction
AT&T Inc. shares fell 7.6% on Thursday (July 21) after the company released Q2 2022 results, and are down another 2.9% as of 11:50 am EST on Friday.
We initiated a Hold rating on AT&T in July 2021, expressing our view that shares should be avoided. Since then AT&T shares have lost 10.6% in a year (adjusted for the $5.92 day-1 value of…