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One Factor Driving AT&T (T) to a One-Year Low Today

NEW YORK (TheStreet) -- AT&T  (T) fell 1.16% to $33.31, down 39 cents from its previous close of $33.70, at the close of the trading day on Wednesday after the wireless carrier reported better-than-expected earnings, but subscriber growth slowed for the fourth quarter.

The stock had fallen to one-year low of $32.01 shortly after the market opened on Wednesday morning, but it recovered throughout the day and maintained a relatively steady climb almost until the closing bell. AT&T has a one-year high of $39 and hit a high of $33.55 for the day. It amassed a volume of 82,914,388, nearly four times its average of 22,581,200. 

AT&T said it added 809,000 net wireless subscribers in the fourth-quarter and added 566,000 wireless devices to its contract-based plans, the most lucrative of the company's plans. That latter figure fell below the expectation of 636,000 from the analysts polled by Thomson Reuters. The 566,000 additions also trailed the market leader, Verizon  (VZ), which added 1.6 million subscribers, and T-Mobile U.S.  (TMUS), which added 869,000.

"Price competition is heating up and 2014 EPS guidance was at the low end of expectations," said David Peltier, Portfolio Manager of DividendStockAdvisor.com. "Still, I'd take the 5.7% dividend yield, over VZ's 4.5%, at current levels."

The company announced it earned $1.31 a share, in the quarter, compared to a loss of 68 cents in the same period one year earlier. The results included a gain of $7.6 billion related to pensions. Adjusted earnings per share were 53 cents, excluding items, which surpassed analysts' expectations. Revenue climbed 2% to $33.2 billion, which also beat analysts' expectations. Wireless revenue, including equipment sales, grew 5% to $18.4 billion. Finally, the customer defection rate came in at 1.11%.

The carrier also noted that, of the 566,000 additions, 299,000 were smartphones and 267,000 were tablets, which have lower monthly fees than phones. 

TheStreet Ratings team rates AT&T INC as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate AT&T INC (T) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • T's revenue growth has slightly outpaced the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • AT&T INC has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AT&T INC increased its bottom line by earning $1.21 versus $0.66 in the prior year. This year, the market expects an improvement in earnings ($2.48 versus $1.21).
  • The debt-to-equity ratio is somewhat low, currently at 0.89, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.38 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for AT&T INC is rather high; currently it is at 58.32%. Regardless of T's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.86% trails the industry average.
  • You can view the full analysis from the report here: T Ratings Report

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