AT&T Inc. (T) is a trending stock: facts to know before you bet on it

AT&T (T) is one of the most watched stocks by Zacks.com visitors lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.

Shares of this telecommunications company have returned +4.1% over the past month compared to the -10.5% change in the Zacks S&P 500 composite. Industry Zacks Wireless National, which AT&T belongs to, lost 4.1% over this period. Now the key question is: where could the stock be heading in the near term?

Although media reports or rumors of a material change in a company’s business outlook usually cause its stock to trend and result in an immediate price change, there are always certain fundamental factors that ultimately determine the buy and hold decision.

Revisions to earnings estimates

At Zacks, we prioritize evaluating change in a company’s future earnings projection over anything else. This is because we believe that the present value of its future income stream is what determines the fair value of its stock.

Our analysis is primarily based on how sell-side analysts covering the stock revise their earnings estimates to reflect the latest trading trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when the fair value of a stock is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term movements in stock prices.

AT&T is expected to post earnings of $0.63 per share for the current quarter, representing a year-over-year change of -29.2%. Over the past 30 days, the Zacks consensus estimate has changed by -2.6%.

For the current year, the consensus earnings estimate of $2.62 indicates a change of -22.9% from the prior year. Over the last 30 days, this estimate has changed by -2.1%.

For the next fiscal year, the consensus earnings estimate of $2.63 indicates a change of +0.3% from what AT&T is expected to report a year ago. Over the past month, the estimate has changed by +152.9%.

With a strong externally audited track record, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s price direction in the short term, as it effectively harnesses the power of earnings estimate revisions. . Due to the magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, AT&T is ranked Zacks Rank #5 (Strong Sell).

The chart below shows the evolution of the company’s consensus 12-month EPS estimate:

12 month EPS

Expected revenue growth

Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a business.

In the case of AT&T, the consensus sales estimate of $29.19 billion for the current quarter indicates a year-over-year change of -33.7%. Estimates of $127.57 billion and $121.42 billion for the current and next fiscal year indicate changes of -24.5% and -4.8%, respectively.

Latest reported results and history of surprises

AT&T reported revenue of $38.11 billion last quarter, representing a -13.3% year-over-year change. EPS of $0.77 for the same period versus $0.86 a year ago.

Compared to the Zacks consensus estimate of $38.3 billion, reported revenue is a surprise -0.52%. The EPS surprise was -1.28%.

In the past four quarters, AT&T has exceeded consensus EPS estimates three times. The company has exceeded consensus revenue estimates twice during this period.

Evaluation

Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.

While comparing the current values ​​of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values ​​help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of ​​the reasonableness of the stock price .

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to traditional and unconventional valuation metrics to rank stocks from A to F (an A is better than a B; a B is better than a C; and so on), is quite useful in determining whether a stock is overvalued, correctly priced, or temporarily undervalued.

AT&T is rated B on this front, indicating that it is trading at a discount to its peers. Click here to see values ​​for some of the rating metrics that led to this rating.

Conclusion

The facts discussed here and plenty of other information on Zacks.com might help determine whether it’s worth paying attention to the market buzz about AT&T. However, its Zacks No. 5 ranking suggests it may underperform the broader market in the near term.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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