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Desroches projected a free cash flow for the third quarter between $4.5 billion and $5 billion, aligning with AT&T’s year-end target of at least $16 billion in free cash flow. These figures are consistent with AT&T’s previous full-year forecast, although the company hadn’t previously provided third-quarter estimates.
Earlier in the year, AT&T had projected a free cash flow of $11 billion for the remainder of the year, anticipating a higher amount in the fourth quarter. This prediction seems to be confirmed by Desroches’ comments, considering AT&T generated $5.2 billion in free cash flow during the first half of the year.
AT&T’s collaboration with the Environmental Protection Agency (EPA) was also discussed by Desroches, particularly focusing on the investigation into issues related to leftover lead-sheathed cables. This follows CEO John Stankey’s recent statement that there is no public health crisis at the site under investigation.
The CFO also noted that AT&T’s capital expenditures are expected to moderate beyond this year, mirroring trends observed at Verizon Communications (NYSE:VZ) and T-Mobile US (NASDAQ:TMUS). This moderation could potentially increase free cash flow.
AT&T has been identified as the most aggressive among the three major telecom companies in terms of promotions for the new iPhone 15, indicating that AT&T is willing to sacrifice profitability for customer growth. The company has been successful in adding postpaid phone subscribers, a key metric within the industry. The company’s mobility service revenue, which constitutes approximately half of its total revenue, increased by 4.9% in the second quarter.
Despite challenges such as ill-advised acquisitions, sluggish growth, and issues with lead-sheathed cables, AT&T’s shares show potential for growth. The company’s stock is trading at a price-to-free cash flow of less than 7, based on its yearly guidance, and offers a dividend yield of 7.4%. This could be a promising yield if AT&T continues to deliver steady, low-risk growth.
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