Rebecca Byrne
SBC Communications (SBC Quote - Cramer on SBC - Stock Picks) reaffirmed its guidance for 2002 and said it would consider raising its dividend or buying back stock in the future.
Chairman and Chief Executive Ed Whitacre made the statements at a meeting with analysts in New York on Thursday. He said that while the company would consider a stock repurchase or a dividend increase "we don't think it's timely at this point to make any pronouncements on that." At least one analyst wasn't surprised by SBC's announcement. "The company typically returns about 70% of its excess cash to shareholders," said John Hodulik, an analyst at UBS Warburg. "They said there may be room to increase that number." The company might also look into acquisitions, Whitacre said, but he added that SBC would avoid anything that would be dilutive to current shareholders. Analysts said Whitacre was slightly more aggressive on the subject of consolidation than other CEOs have been recently. The local telephone service provider reiterated its expectations for earnings to grow 5% to 7% this year and said first-quarter earnings should fall in a range of 49 cents to 51 cents a share, excluding one-time items, but including the effect of an accounting change. Analysts polled by Thomson Financial/First Call are looking for a first-quarter profit of 51 cents. For the full year, SBC reaffirmed its revenue growth target of 1% to 3% and said it expects to generate $1.5 billion to $2 billion in free cash flow after dividends. SBC said also discussed options for long distance voice and data services, as well as Internet and wireless offerings. The San Antonio, Texas, company is hoping to have more than 2 million DSL Internet service subscribers at the end of 2002, which would represent an increase of more than 50% from last year. SBC said it doesn't see much opportunity for growth internationally and instead plans to focus on building up operations within the U.S. The company also said it will continue to reduce its workforce this year "in areas not directly impacting customer service or responsible for growing data or long-distance revenues." In the last five months, the company has cut about 7,500 positions. "Growth in the telecom industry has slowed to a crawl so they highlighted their ability to cut costs," Hodulik said. "While growth in the core business is still expected to suffer, they said that would be offset by strength in DSL, long distance and data services." Shares of SBC fell 1% to $38.39 Thursday, and they are down slightly since the start of the year.
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