Why Analysts Are Raising AT&T Targets After Earnings

By Paul Ausick Updated Jan 13, 5:21AM EST · Published Jul 24, 10:18AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

AT&T Inc. (NYSE: T) reported second-quarter earnings after markets closed on Thursday, and shares got a 1.4% price bump in Friday’s trading. So far this year the company’s shares are up 25%.

But success could be breeding its own demise. AT&T’s dividend yield has narrowed from around 5.6% earlier this year to around 4.3% as investors bid up the shares in a search for returns. Analysts are wondering if the shares are fairly valued, still have headroom or are overbought.

AT&T posted $0.72 in earnings per share (EPS) on $40.52 billion in revenue in the second quarter. Consensus estimates from Thomson Reuters called for $0.72 in EPS on $40.62 billion in revenue. Free cash flow rose to $4.8 billion, and the company said it expects to meet or exceed full-year guidance.

[nativounit]

Analysts at Merrill Lynch maintained a Buy rating on the stock and a price objective of $46. They also noted:

Adjusted EBITDA of $13.4bn was -2.7% below our $13.8bn estimate and -1.4% below consensus of $13.59bn. Management noted it is on track to meet or exceed full year guidance of double-digit revenue growth, Adj. EPS growth in the mid-single digit range or better, stable consolidated margins, capex of $22bn (trending to low end), and FCF growth with dividend coverage in the 70s%.

Jefferies removed the telecom giant from its Franchise Picks list on Wednesday but reiterated its Buy rating and raised its price target from $44 to $48 after AT&T reported its results.

Here are other analyst moves we saw:

Oppenheimer maintained an Outperform rating and raised its price target from $40 to $46.
Cowen lifted its price target from $44 to $45.
FBR Capital reiterated its Market Perform Rating and boosted its price target from $38 to $42.
Raymond James raised its price target from $41 to $44.
RBC lifted its price target from $41 to $44.

Aside from its still-handsome dividend yield, AT&T has benefited this year from its acquisition of DirecTV and from improvement in its wireless business. Beating guidance may be a requirement for keeping the share price high enough to maintain the current yield.

The stock closed Friday at $43.11, in a 52-week range of $30.97 to $43.89. The consensus price target is $42.27 and the high target is $48. Recent changes may not be included yet in the calculation.

[wallst_email_signup]

About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.