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Bull of the Day: AT&T

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Sometimes even the Bull of the Day can sound a little bit boring, but in the world of investing, sometimes “boring” is actually perfect.

Though its iconic name invokes memories of the company founded by Alexander Graham Bell in 1880, AT&T Inc (T - Free Report) is currently a thoroughly modern commercial giant and literally the world’s single largest telecommunications company.
Born as the Bell Telephone Company, AT&T has been reinvented over and over again in a span of more than a century, emerging from the U.S. government breakup of the “Ma Bell” monopoly in the 1980’s, the widespread transition from landlines to cellular communications in the 1990’s and, most recently, the merger with Time Warner that survived a U.S. Department of Justice challenge and made AT&T not only a leader in telecommunications, but also a content and media behemoth.

The company’s subscription based revenue model in traditional telephone services, cellular and digital media provides consistent strong cash flow and the recent acquisition promises to add powerful cost synergies and improved margins.
After the Time Warner merger, AT&T operates four distinct units:

WarnerMedia which encompasses HBO, Turner and Warner Bros. which operates the world’s largest and creates premium entertainment content.

AT&T Communications which provides over 100 million U.S customers with TV, mobile and broadband services.

AT&T International provides customers with pay television services across Mexico, Latin America and the Caribbean.

AT&T Ads and Analytics gives marketers statistical data to allow them to maximize advertising impact at an effective cost.

After a solid earnings beat in Q2 in which AT&T posted a net of $0.91/share, 7% higher than the Zacks consensus estimate of $0.85, and ten analysts upwardly revised estimates for the full 2018 year, earning AT&T a Zacks Rank #1 (Strong Buy).

The company’s report to investors was universally upbeat, highlighting gains in earnings, subscribers,  and – importantly - free cash flow that was up more than 46% year over year, reinforcing the safety of AT&T’s juicy 6.4% dividend. Revenues were somewhat of a disappointment, but that was due largely to a one-time change in accounting practices.

Earnings guidance for 2018 was raised to $3.50/share and the analysts are even more optimistic as the Zacks Consensus Estimate now stands at $3.53/share. Guidance for free cash flow was raised to $21 billion.

With a forward P/E ratio under 9X, AT&T looks like a legitimate value opportunity as well and an income stock. Over history, the major indexes have seen many companies come and go, but there are a precious few that are able to weather the storm over decades - or even centuries – survive bull and bear markets, economic expansions, recessions, even depressions, and still come out with an impressive mix of services, make money quarter after quarter and reward investors with a solid dividend.

AT&T is one of those good ones.

Wall Street’s Next Amazon Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius. Click for details >>


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