* Reports Q3 2019 results on Monday, October 28 before the open
* Revenue expectation: $ 45.13 billion
* EPS expectation: $ 0.93
America & # 39; s largest telecom operator, AT&T (NYSE :), has a lot on its plate these days. Before announcing its third quarterly report on Monday, it is trying to draw up a credible restructuring plan to make a deal with an activist investor campaigning for change: utility is steadily losing subscribers and coming under pressure to cut margins improve.
And one day before the win, AT&T is scheduled to unveil its HBO Max streaming service, making it a competitor in the lucrative streaming video market, where it will compete with some of & # 39; the world's largest companies, including Apple (NASDAQ 🙂 and Amazon (NASDAQ :).
This is the context that makes the company's Q3 earnings even more important for investors who are concerned about the business direction of the AT&T and the huge debt burden that it has built up.
AT&T shares, with a market value of approximately $ 269 billion, have done little for investors in recent years, despite a series of acquisitions by Chief Executive Randall Stephenson and his predecessor. The share rose 29% this year, but fell 2.4% yesterday, on the fourth consecutive day of losses. It closed yesterday's session at $ 36.82. Due to the ups and downs, shares have remained largely unchanged over the past five years, while the benchmark has risen by around 50%.
Last month, Elliott Management Corp. known to have accumulated a stake of about 1% in AT&T. In a letter, the investor challenged AT&T's leadership, criticized the company's shift to the media sector, and called for a review of units that may not fit into its long-term strategy, including the DirecTV satellite division and Mexican wireless activities.
Does a reversal take shape?
The big question for investors at the moment is whether they should now bet on AT & T & # 39; s shares and take advantage of the upcoming turnaround. There are some signs that the company is acting quickly to change tactics while trying to protect its reputation as a reliable dividend payer.
According to Bloomberg data, AT&T shares are among the top 20 most common US listed companies among institutional investors – and this is mainly because utility has paid a consistently growing payout to shareholders for 35 consecutive years.
The last signs of a possible impending turnaround came from the company's Q2 win report in July, when Stephenson showed that he wants to get rid of low-income-generating customers quickly by increasing subscription fees for some services.
Earlier this month, AT&T said it would raise prices for its TV Now package by around 30% – the second price increase this year. In the quarter ending June 30, the company lost a record number of video customers after increasing rates for TV packages. The move helped AT&T meet its earnings expectations and produce extra money to cover its dividends.
The company is also making progress in asset sales, with the recent divestment of a stake in Hulu video streaming platform and the Time Warner real estate in New York. These measures, combined, brought a strong message to the markets – even before poking Elliott Management – that Stephenson has a plan.
Bottom Line
The recovery in AT&T shares this year is the result of a combination of factors including a high demand for dividend shares, some improvement in cash position and the involvement of an activist investor who has a reputation for encouraging change at companies in difficulty. to strengthen their stock values. The company's earnings in the third quarter will provide more details about its turnaround strategy and the impact on stock price.
