AT&T: Subscriber Growth & Buybacks Signal Bullish Turnaround

Core Viewpoint - AT&T Inc. reported a solid first-quarter 2025 earnings report, showcasing significant momentum in its core connectivity businesses, leading to a cautiously optimistic outlook for the company [1] Operational Performance - The company demonstrated strong operational strength, particularly with subscriber growth that outpaced key rivals [2] - AT&T added 324,000 postpaid phone subscribers, exceeding analyst forecasts, while Verizon reported losses, indicating AT&T's gaining mobile market share [4] - AT&T Fiber added 261,000 net subscribers, marking the 21st consecutive quarter with over 200,000 additions, reflecting strong demand for high-speed fiber [5] - Mobility service revenue increased by 4.1% year-over-year to $16.7 billion, while Consumer Fiber revenue surged 19.0% to$ 2.1 billion [6] Financial Metrics - Consolidated revenues grew by 2.0% year-over-year to $30.63 billion, slightly surpassing the estimated$ 30.39 billion [8] - Adjusted earnings per share (EPS) increased to $0.51 but fell short of the$ 0.52 consensus by one cent [9] - Free cash flow (FCF) increased by 13.5% to $3.1 billion from$ 2.8 billion in the prior year, highlighting the company's effectiveness in translating operational performance into cash [10] Strategic Execution - Management reaffirmed full-year guidance, including targets for over $16 billion in FCF and Adjusted EPS between$ 1.97 and $2.07 [11] - The company operates within its target net leverage range of 2.5x and anticipates reaching this target in the first half of 2025, which will unlock the next phase of capital returns [12] - AT&T plans to commence share repurchases under its authorized$ 10 billion program in the second quarter of 2025, potentially boosting EPS [13] Dividend and Valuation - The current annual dividend is $1.11, yielding around 4.14%, with a sustainable payout ratio near 50% [14] - AT&T's stock price has appreciated over 60% in the past year, trading at approximately 12.7 times forward earnings estimates, which seems reasonable for a mature company [15] - Positive analyst price target revisions followed the Q1 results, although the consensus target near$ 28.00 implies limited immediate upside from recent levels around $27.70 [16] Future Outlook - The first-quarter performance reinforces AT&T's strategic focus on core connectivity, successfully attracting high-value wireless and fiber customers [17] - The imminent share buybacks add a significant positive catalyst, making AT&T an increasingly solid proposition for investors seeking stable dividends and potential capital appreciation [18]