AT&T Q3 Earnings: Is NYSE:T Cheap at 8.5x Forward P/E?

in EARNINGS/INVESTING IDEAS by

AT&T Inc. (NYSE:T) is scheduled to report Q3 earnings results on October 22, 2020.

The company is expected to report earnings of $0.77/share on revenue of $41.566 billion. The consensus earnings per share (EPS) of $0.77/share is based on a poll of 22 analysts and represents a decline in eps of −18.6% over the same quarter last year, when the company reported earnings of $0.94/share.

The revenue forecast of $41.566 billion based on a poll of 19 analysts implies a year-over-year (YoY) decline in revenue of −6.8%. Last year the company reported $44.588 billion in revenue for the quarter.

Expected to report EPS contraction of −18.6% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $41,566.27 $44,588.00 −6.8%
EPS $0.77 $0.94 −18.6%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 8 tracked quarters, missed 2 quarters, and met expectations 3 quarters.

What are your expectations from AT&T Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Qufarter Expected Reported Surprise Result
Q2, 2020 $0.79 $0.83 4.9% Beat
Q1, 2020 $0.85 $0.84 −1.4% Missed
Q4, 2019 $0.87 $0.89 2.4% Beat
Q3, 2019 $0.92 $0.94 1.7% Beat
Q2, 2019 $0.89 $0.89 −0.1% Missed
Q1, 2019 $0.85 $0.86 0.6% Beat
Q4, 2018 $0.85 $0.86 0.7% Beat
Q3, 2018 $0.94 $0.90 −4.2% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −2.0%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 23, 2020 $30.16 $29.57 −2.0% Decline
April 22, 2020 $29.87 $29.50 −1.2% Decline
January 29, 2020 $38.58 $37.43 −3.0% Decline
October 28, 2019 $36.91 $38.06 3.1% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.89, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.89 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

AT&T Inc. is currently trading at $26.88/share, down −1.6% for the day. The company is trading at approximately 67.7% of its 52-week high of $39.70/share. The company’s stock price is down −9.1% since the last earnings report and down −3.1% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 19.31 suggests the company is trading in technically oversold territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:T Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 16.10 and a forward P/E multiple of 8.50.

AT&T Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.09. The following table summarizes some other key fundamental ratios:

Data as of October 20, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $26.88
P/E Ratio 16.1x
P/E Ratio (Fwd) 8.5x
PEG Ratio −0.5
Total Debt / Total Capital 47.9%
Levered Free Cash Flow $25.844 billion
EV / EBITDA 7.1x

Finbox

AT&T Inc. is a large-cap stock with a market capitalization of $191.5 billion and a total enterprise value of $388.3 billion. The company operates in the Communication Services sector and the Diversified Telecommunication Services industry.

AT&T Inc. provides telecommunication, media, and technology services worldwide. The company operates through four segments: Communications, WarnerMedia, Latin America, and Xandr. The Communications segment provides wireless and wireline telecom, video, and broadband and Internet services; video entertainment services using satellite, IP-based, and streaming options; and audio programming services under the AT&T, Cricket, AT&T PREPAID, and DIRECTV brands to residential and business customers. This segment also sells handsets, wirelessly enabled computers, and wireless data cards manufactured by various suppliers for use with company’s voice and data services, as well as various accessories, such as carrying cases and hands-free devices through the company-owned stores, agents, and third-party retail stores. The WarnerMedia segment primarily produces, distributes, and licenses television programming and feature films; distributes home entertainment products in physical and digital formats; and produces and distributes mobile and console games, and consumer products, as well as offers brand licensing services. It also operates cable networks, multichannel premium pay television, and over-the-top services; and digital media properties. The Latin America segment offers video entertainment and audio programming services under the DIRECTV and SKY brands primarily to residential customers; pay-TV services, including HD sports video content; and postpaid and prepaid wireless services under the AT&T and Unefon brands, as well as sells various handsets through company-owned stores, agents, and third-party retail stores. The Xandr segment provides digital and video advertising services. The company was formerly known as SBC Communications Inc. and changed its name to AT&T Inc. in November 2005. AT&T Inc. was incorporated in 1983 and is based in Dallas, Texas.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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