AT&T: Q3 EBITDA Down In All 3 Key Segments; Avoid

(Preview) Company Update (T US) (Neutral)

Summary

• AT&T fell after Q3 results to $25.76, but structural problems outweigh its (post-spin-off) 14% free cash flow yield and 4.5% dividend yield.

• In Mobility, the largest segment, EBITDA fell 0.4% from Q2 and grew just 3.6% year-on-year, despite total connections growing 11%.

• Consumer Wireline EBITDA fell 9.6% from Q2 due to higher costs. Net adds have been trending down as non-fiber losses rise.

• Business Wireline saw its EBITDA decline resumed for the first time since Q4 2020, as wireline and legacy revenues continued to shrink.

• WarnerMedia had double-digit revenue and EBITDA growth but is not large enough to offset the problems at the rest of AT&T.

Introduction

We review our Neutral rating on AT&T Inc. (T) after Q3 2021 results were released on Thursday (October 21). AT&T stock ended the day down 0.6%.

We initiated our Neutral rating on AT&T in July. Since then shares have lost 10% (after dividends), underperforming the S&P 500 by nearly 15 ppt.

We believe most of AT&T's businesses are i…