AT&T (T) Stock Falls 3% on Slashed FCF Outlook, Results Seen as 'Solid'

Shares of AT&T (NYSE: T) are down about 3% in premarket trading after the telecom giant slashed its 2022 free cash flow (FCF) outlook.

In Q2, AT&T said it recorded EPS of $0.65 on revenue of $29.6 billion, higher than the consensus of $0.62 per share on revenue of $29.57 billion. Free cash flow was reported at $1.4 billion, much worse than the expected $3.7 billion.

AT&T shares tumbled after AT&T slashed free cash flow guidance for the full year to about $14 billion, down from $16 billion and worse than the expected $15.96 billion, to reflect “heavy investment in growth and working capital impacts related to timing of collections.”

On a more positive note, the company raised the Mobility service revenue guidance to 4.5-5% growth for the full year.

“Our results the last eight quarters demonstrate that our deliberate strategy of focusing on growth is helping us gain valuable customer relationships, and we’re confident in our ability to maintain this momentum while also continuing to reduce debt and deliver an attractive dividend,” said John Stankey, AT&T CEO.

Goldman Sachs analyst Brett Feldman said the results were “solid”, although the 2022 guidance was mixed.

“While AT&T’s operating performance in the quarter was generally better than we had expected, especially in key growth areas such as 5G and fiber, we would not be surprised to see the stock initially trade-down as investors digest the significance of AT&T’s lowered outlook for 2022 FCF guidance and whether it reflects factors that are likely timing-related or otherwise contained to 2022, or if they could present downside risk to AT&T’s 2023 targets as well,” Feldman commented.

By Senad Karaahmetovic

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