UBS Cuts AT&T (T) to Neutral on Lower EPS Estimates

September 28, 2016 6:38 AM EDT
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Price: $41.45 +1.10%

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(Updated - September 28, 2016 8:06 AM EDT)

UBS downgraded AT&T (NYSE: T) from Buy to Neutral with a price target of $43.00 (from $46.00). Analyst John C. Hodulik sees lower earnings growth than he originally expected and reduced 2016 and 2017 estimates.

"We are lowering our EPS estimates by 3% to reflect the increased competitive intensity in wireless and incremental costs associated with AT&T's DTV Now roll-out. We now project EPS of $2.84 in 2016 (prior $2.93) and $3.02 in 2017 (prior $3.12), reflecting 4.6% and 6.4% growth, respectively. We continue to believe AT&T is on track to exit 2016 with $1.5B in synergies and reach its $2.5B target next year," said Hodulik.

Discussing increasing competitive intensity in wireless, the analyst said, "We recently highlighted our view that wireless EBITDA growth is set to slow, driven by 3 factors: 1) diminishing benefits from the shift to installment plans, 2) limited upside to savings from lower volumes, and 3) ramping competitive intensity. The recent ~$300 per iPhone promotions suggest this theory is starting to play out, resulting in lower wireless margins in 2H. While this promotion is about to end, we expect carriers to remain competitive in 4Q and with AT&T's new OTT product around the corner and new cable MVNO launches in mid-2017, competitive intensity is only picking up."

For an analyst ratings summary and ratings history on AT&T click here. For more ratings news on AT&T click here.

Shares of AT&T closed at $41.46 yesterday.

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