On Feb 7, we maintained our Neutral recommendation on
). The company has strong growth prospects including robust
subscriber additions, growing demand for mobile Internet, faster
fiber deployment, admirable U-verse gain and a healthy balance
sheet. These are partially clouded by a saturated wireless
market, persistent losses in access lines, labor union issues and
aggressive pricing plans of direct competitors.
Why Kept at Neutral?
We believe AT&T is experiencing strong momentum in both
wireline and wireless businesses. Continued strength in
smartphone and branded computing device sales are fueling growth
in its wireless business. Wireline is also improving with
continued growth in its U-verse and strategic services.
The company displays the industry-best Internet speeds and has a
wide coverage of 4G Long Term Evolution (LTE) services. The
company has, currently, covered about 200 million with the
services and expects to achieve the target of connecting 90% of
300 million people by 2013-end. Further, the carrier's Mobile
Share plan is gaining high popularity among people with nearly 10
million subscribers already under its belt. Management intends to
launch new high-tier plans in the coming quarters.
AT&T is also looking at opportunities to improve its growth
profile through a number of strategic initiatives. The company's
agreement with Verizon Wireless to acquire spectrum licenses is
expected to boost its position substantially within the sector.
Various lucrative alliances along with a well-designed investment
program will likely raise the earnings and revenue levels in the
near to medium term.
Nevertheless, the company faces a number of risk factors such as
a competitive telecom environment, constant upgrades in
technology, failure to succeed in spectrum auctions and a hefty
For the second and third quarters of 2013, the Zacks Consensus
Estimates for earnings are 71 cents and 67 cents per share,
respectively. This reflects a respective year-over-year growth of
6.9% and 8.3%.
Other telecom stocks that will likely perform impressively in the
coming months are
Shenandoah Telecommunications Co.
) - that has a Zacks Rank #1 (Strong Buy).
Verizon Communications Inc.
) hold Zacks Rank #2 (Buy) and are likely to outperform in the
SHENANDOAH TELE (SHEN): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
VIMPELCOM LTD (VIP): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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