AT&T (NYSE:T) broke down in March when investors decided the risks of its media division outweighed the dividend income.
For now, the company’s high debt load is manageable but deferring the stock buyback may hurt its return for investors this year.
AT&T posted an EPS of 63 cents (84 cents non-GAAP). Revenue fell 4.6% Y/Y to $42.78 billion. Though the stock buyback is on hold, management said it would prioritize its current dividend. This will prevent an exodus of income investors and limit a further drop in the stock.
Another worry is that the quarterly reporting period did not include much of the disruptions that followed after March. In the next quarter, the impact of the stay-at-home order will weigh on operating costs and revenue.
AT&T will probably have higher operating costs related to improving the home internet services. Consumers struggling to pay for bills may cancel their phone or cable subscription.
WarnerMedia hurt the Q1/2020 result. Investors should expect the unit continuing to drag results lower. The company said that COVID had a $400 million revenue impact and a $250-million EBITDA impact on the quarter.
AT&T stock trades at fair value with few positive catalysts ahead. I do not expect the stock outperforming the index.
