NEW YORK (TheStreet) -- AT&T (T) is up on a slew of news over the last few days. This included positive comments from Morgan Stanley, which said that the company could see significant EPS lift in 2014 due to a customer shift towards instalment payment plans and away from direct mobile phone purchases.
The popularity of payment plans offered by T-Mobile (TMUS) has caught on as customers use the payment plan option to purchase handsets that may otherwise have been too expensive. "Carriers are moving to installment sales at varying degrees, with T-Mobile and AT&T leading the way," wrote analyst Simon Flannery in the Morgan Stanley note.
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"We expect the transition to installment sales to significantly and temporarily boost carriers' EBITDA and EPS growth, but lower cash flows," Flannery added.
AT&T also announced that it had invested $6.55 billion from 2011-2013 in an effort to enhance its infrastructure in the state of Texas. The telecom giant made 3,645 upgrades in the state in 2013 alone as it continues to execute its Project Velocity IP program and enhance its wireless broadband network.
That announcement comes less than 24 hours after the company announced that it had spent another $1.15 billion upgrading its network in Louisiana over the same period. AT&T closed up 0.27% at $32.98 on Tuesday.
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 some important positives, 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, compelling growth in net income, notable return on equity, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. 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 2.3%. Since the same quarter one year prior, revenues slightly increased by 1.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, AT&T INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for AT&T INC is rather high; currently it is at 63.10%. It has increased significantly from the same period last year. Along with this, the net profit margin of 20.84% is above that of the industry average.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Diversified Telecommunication Services industry average. The net income increased by 279.2% when compared to the same quarter one year prior, rising from -$3,857.00 million to $6,913.00 million.
- The debt-to-equity ratio is somewhat low, currently at 0.82, 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 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full analysis from the report here: T Ratings Report