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AT&T expects to inject $24 billion in capital expenditures in part for 5G infrastructure development.
David Paul Morris/Bloomberg
AT&T
Fourth-quarter earnings beat Wall Street estimates. A key metric for the wireless company also came in higher than expected.
to
AT&T
(Stock ticker: T), the driver this earnings season is free cash flow. The company reported $14.1 billion in cash flow for 2022, slightly above management’s previous guidance and an estimate of $13.8 billion among analysts tracked by FactSet. AT&T has set its 2023 forecast at $16 billion or more, matching estimates of $16.2 billion. Wall Street forecasts for AT&T’s cash flow this year are down nearly 20% from the middle of last year.
“We are well positioned to face economic challenges,” said Pascal Desroches, AT&T’s chief financial officer. Barron In an interview Wed.
AT&T investors love the dividend and the free cash flow that finances it. The company currently pays out $1.11 in annual dividends per share, or a yield of 5.8% based on Tuesday’s closing prices — well above
Standard & Poor’s 500
The dividend yield is 1.6%.
In February 2022, the company cut its dividend by 47% after being fired
Warner Media
.
Subsequently, it cut its free cash flow forecast for 2022 twice. Inflation as well as delays in collecting payments were the problem. The stock is down 4% over the past year, and missing out on already-lowered expectations should add to investor excitement.
“Securing that return is very high,” Desroches said. “As a CEO or CFO, you just have to do it [a dividend cut] Once. It was the right thing to do at the time, but nothing would be the same [any] need at all [for another]. “
The stock rose 2.4% to $19.63 after results on Wednesday.
The Dallas, Texas-based company reported 61 cents of adjusted earnings on revenue of $31.3 billion for the fourth quarter, which ended in December. Analysts were looking for 57 cents on sales of $31.4 billion. competition
Verizon
(VZ) identical profits Tuesday forecast – Barron T-Mobile (TMUS) preferred.
AT&T reported 1.104 million total net postpaid subscribers in the fourth quarter, above estimates of 906 million. Postpaid phone business added 656,000, slightly above the expected 644,800.
Average revenue per user in the postpaid phone business was up 2.5% from last year. It is likely to benefit from the price increases that were made to older wireless plans last year as well as users moving to those plans.
Desroches said that after normalization in past years, he has not seen consumers delay their mobile payments, despite expectations of an upcoming recession. “Think about how important it is for consumers to connect to mobile services,” he added.
As in 2022, AT&T plans to inject $24 billion in capital expenditures this year as it builds out its 5G wireless and fiber optic networks. Analysts expected $22.1 billion.
That shouldn’t scare investors too much. Desroches forecast peak investment in 2022 and 2023 several times last year and expects capital investment to start tapering to about $20 billion next year.
Sure, high capital investments cut into free cash flow and investors expect companies to provide liquidity in the current weak economic environment, but AT&T should be just fine, because carriers are usually more resilient during economic downturns.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com