The third-quarter results for AT&T Inc. (NYSE:T) were released last week, making it a good time to revisit its performance. It looks like a pretty bad result, all things considered. Although revenues of US$45b were in line with analyst predictions, earnings fell badly short, missing estimates by 30% to hit US$0.50 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
Taking into account the latest results, AT&T’s 24 analysts currently expect revenues in 2020 to be US$182b, approximately in line with the last 12 months. Earnings per share are expected to surge 26% to US$2.81. Yet prior to the latest earnings, analysts had been forecasting revenues of US$182b and earnings per share (EPS) of US$2.85 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$38.52. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic AT&T analyst has a price target of US$48.00 per share, while the most pessimistic values it at US$20.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how analyst forecasts compare, both to the AT&T’s past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 0.1% revenue decline a notable change from historical growth of 6.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 1.1% annually for the foreseeable future. It’s pretty clear that AT&T’s revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts do imply revenues expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for AT&T going out to 2023, and you can see them free on our platform here..
It might also be worth considering whether AT&T’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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