Is T Stock a Smart Investment Option Before Q2 Earnings Release?

AT&T Inc. T is scheduled to report second-quarter 2025 earnings on July 23, before the opening bell. The Zacks Consensus Estimate for revenues and earnings is pegged at $30.53 billion and 51 cents per share, respectively. The earnings estimates for AT&T for 2025 and 2026 has remained unchanged over the past 60 days.

Earnings Surprise History

The communications service provider delivered a four-quarter earnings surprise of 2.64%, on average.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for AT&T for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. 

AT&T currently has an ESP of -2.60% and a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping the Upcoming Results

During the quarter, AT&T announced that its fiber broadband network has reached 30 million consumer and business locations across the United States. The major milestone was realized ahead of schedule. This is a major step toward achieving its long-term goal of 60 million fiber locations by 2030.

The company also inked a definitive agreement to acquire Lumen's fiber connectivity business for $5.75 billion. Following the completion of the buyout, AT&T will acquire 1 million fiber customers and 4 million fiber locations across 11 U.S. states. Integration of Lumen’s customer base and fiber deployment capabilities will significantly boost T’s competitive edge in the fiber broadband domain.

In the to-be-reported quarter, AT&T’s new wireless plans with enticing features are tailored for people aged 55 and above. By opting for the plan, customers can get one line for $40/month or two lines for $35/month. The plan includes unlimited talk, text and data. The pricing makes AT&T’s 55+ plans relatively cheaper compared with plans offered by other competitors. These factors are expected to boost customer engagement in the 55+ age category in the near term.

AT&T is also collaborating with AST SpaceMobile to develop satellite-based cellular connectivity for its customers. Apart from regular customers, this is expected to be a game changer for first responders and public safety applications relying on mission critical communication.

In the quarter under review, AT&T has inked a strategic agreement with Palo Alto Networks to develop an end-to-end network-integrated secure access service edge solution for businesses to protect data, applications and end users. It also recently introduced AT&T Turbo for Business, a premium mobile service feature that offers greater performance and consistent connectivity on AT&T’s network.

The Zacks Consensus Estimate for revenues from the Communications segment, which accounts for the lion’s share of total revenues, is pegged at $29.39 billion, while our model projects revenues of $29.72 billion.

However, AT&T operates in a highly competitive and saturated U.S. wireless market. Stiff competition from other industry leaders such as T-Mobile, Verizon and Comcast is weighing on its margin. Spectrum crunch has become a major issue in the U.S. telecom industry. Most of the carriers are finding it increasingly difficult to manage mobile data traffic, which is growing by leaps and bounds. The company’s business wireline business is affected by lower demand for legacy voice and data services.

Price Performance

Over the past year, AT&T has gained 40.4% compared with the industry’s growth of 18.4%, outperforming peers like Verizon Communications Inc. VZ and T-Mobile US, Inc. TMUS.

Key Valuation Metric

From a valuation standpoint, AT&T appears to be trading relatively cheaper than the industry but well above its mean. Going by the price/earnings ratio, the company shares currently trade at 12.56 forward earnings, lower than 12.96 for the industry but well above the stock’s mean of 10.94.

Investment Considerations

AT&T continues to enhance its network infrastructure, including 5G and fiber networks, to provide best-in-class coverage and capacity across the nation. The company has taken a multi-dimensional approach to expand its fiber footprint, which includes in-region fiber network, public-private partnerships, commercial open access agreements and strategic buyout. With comprehensive expertise in network architecture, size and scale, focus on a cost-efficient growth path, AT&T is expected to witness healthy fiber customer additions in the upcoming years.

The company is also placing greater emphasis on understanding customer pain points and identifying market gaps. Its strategy of developing tailored solutions for different sets of customers will likely boost prospects. However, despite solid subscriber momentum in the wireless business, intense competition continues to hinder growth. Verizon’s also aggressively expanding its fiber infrastructure, which can pose a significant challenge to AT&T’s fiber expansion. T-Mobile’s also experiencing healthy traction in its postpaid services. AT&T’s effort to attract customers and beat the competition with high discounts and freebies is straining its margin. The company has a current ratio of 0.7 and a cash ratio of 0.14. It indicates the company may face challenges in meeting short-term debt obligations.

End Note

With a Zacks Rank #3, AT&T appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. Fierce competition with a relatively fixed pool of customers is putting pressure on pricing. Growing spending on promotional offers is weighing on profit.

However, the results of a single quarter are not so vital for long-term stakeholders. Investors who already own the stock may consider holding on to it, as growing investment in fiber infrastructure, customer-oriented strategy, and robust cash flow position bode well for long-term growth.

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This article originally published on Zacks Investment Research (zacks.com).

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