Why DirecTV (DTV) and AT&T (T) Stock Rose in After-Hours Trading Today

NEW YORK (TheStreet) -- DirecTV  (DTV) rose in after-hours trading on Monday amid reports that the satellite television company and AT&T  (T) could announce a cash and stock deal that could occur within the next two weeks.

The Wall Street Journal reported AT&T would likely pay a premium to DirecTV's stock price, which closed at $87.16 on Monday to give the company a market value of almost $45 billion.

Both DirecTV and AT&T rose in after-hours trading.

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Separately, TheStreet Ratings team rates DIRECTV as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DIRECTV (DTV) a BUY. This is driven by a few notable strengths, 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 solid stock price performance, revenue growth, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • Compared to its closing price of one year ago, DTV's share price has jumped by 37.49%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DTV should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • DTV's revenue growth trails the industry average of 14.7%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • DIRECTV's earnings per share declined by 9.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DIRECTV increased its bottom line by earning $5.19 versus $4.61 in the prior year. This year, the market expects an improvement in earnings ($5.80 versus $5.19).
  • Net operating cash flow has slightly increased to $1,590.00 million or 3.51% when compared to the same quarter last year. Despite an increase in cash flow, DIRECTV's average is still marginally south of the industry average growth rate of 5.63%.
  • 48.68% is the gross profit margin for DIRECTV which we consider to be strong. Regardless of DTV'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 7.14% trails the industry average.
  • You can view the full analysis from the report here: DTV Ratings Report

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

"We rate AT&T INC (T) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • T's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has slightly increased to $8,799.00 million or 7.31% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.32%.
  • The debt-to-equity ratio is somewhat low, currently at 0.88, 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 0.42 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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 on the basis of return on equity, AT&T INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The gross profit margin for AT&T INC is rather high; currently it is at 58.98%. 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 11.24% trails the industry average.
  • You can view the full analysis from the report here: T Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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