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AT&T (T) Offers Business Update, Reaffirms Wireless Focus

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The top management of AT&T Inc. (T - Free Report) recently debriefed investors about the current business situation, underlying growth opportunities and its progress on various operational metrics. Jeff McElfresh, the company’s chief executive officer, also shed some light on continued business transformation initiatives to create long-term value for shareholders.

McElfresh reiterated that AT&T is focusing on core wireless businesses to maintain its leading market position as the industry continues to benefit from a healthy uptick in demand amid the lingering coronavirus scare. The company aims to profitably increase its postpaid subscriber base leveraging its network quality and market penetration capabilities. Riding on such a go-to-market strategy, AT&T’s total wireless subscribers increased by 4.9 million to reach 196.5 million in service by the end of third-quarter 2021. The company witnessed solid subscriber momentum with more than 1,218,000 postpaid net additions and 249,000 prepaid phone net additions as the work-from-home trend gained traction. Postpaid churn was 0.92% compared with 0.85% in the year-ago quarter.

While optimizing operations, the company aims to increase efficiencies to lower operating costs and focus on 5G and fiber-based broadband connectivity. McElfresh expects postpaid phone ARPU (average revenue per user) to stabilize in 2022 with higher international roaming calls and the uptrend in premium Unlimited plans.

AT&T is increasingly focusing on its customer-centric business model to attract and retain customers for a lower churn rate. The company is witnessing healthy momentum in its postpaid wireless business with increased adoption of higher-tier unlimited plans. This, in turn, is expected to result in year-over-year growth in wireless revenues, while fourth-quarter EBITDA is likely to increase on a sequential basis.

AT&T is poised to benefit from the impending 5G boom. As the first carrier in the industry, the company has unveiled its 5G policy framework that will hinge on three pillars — mobile 5G, fixed wireless and edge computing. For a seamless transition among Wi-Fi, Long-Term Evolution (LTE) and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network. Its 5G service entails the utilization of millimeter wave spectrum for deployment in dense pockets. In suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. AT&T believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices. An integrated fiber expansion strategy is expected to improve the broadband connectivity for both enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience.

The stock has lost 21.5% in the past year compared with the industry’s decline of 15.8%. Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock.
 

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A better-ranked stock in the broader industry is Clearfield, Inc. (CLFD - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered an earnings surprise of 50.8%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 68.2% since January 2021. Over the past year, Clearfield has gained a solid 168.1%.

Qualcomm Incorporated (QCOM - Free Report) , carrying a Zacks Rank #2 (Buy), is another solid pick for investors. It has a long-term earnings growth expectation of 15.3% and delivered an earnings surprise of 11.2%, on average, in the trailing four quarters.

Earnings estimates for the current year for the stock have moved up 35.4% over the past year. Qualcomm is likely to benefit in the long run from solid 5G traction and a surge in demand for essential products that are the building blocks for digital transformation in the cloud economy.

Sierra Wireless, Inc. (SWIR - Free Report) carries a Zacks Rank #2. It has a long-term earnings growth expectation of 12.5% and delivered an earnings surprise of 34.2%, on average, in the trailing four quarters.

Over the past year, Sierra Wireless has gained 15.9%. The company continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.


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