NEW YORK (TheStreet) -- AT&T Inc. (T) was added to the Franchise Pick list at Jefferies on Wednesday morning. The firm also raised its price target on the telecommunications provider to $40 from $39 and maintained its "buy" rating on the stock.
Jefferies added AT&T to its Franchises Pick list as it believes Wall Street has an "overly bearish" view on the company, which is driven by conservative estimates and questions over the DirecTV (DTV) and Mexican acquisitions.
"DirecTV should remove lingering dividend concerns while providing a complementary product portfolio. Mexico could enhance growth opportunities through a differentiated offer," Jefferies said in an analyst note.
"We see compelling returns for investment in AT&T shares. Our enthusiasm is driven by upside to conservative Street EPS estimates (driven by Wireless margins and ARPU). Furthermore, DTV provides immediate cash flow benefits, and while we assume company guidance on synergies, we see upside to cost savings as well as meaningful revenue and capex synergies," the firm continued.
Shares of AT&T closed at $34.36 on Tuesday afternoon.
Separately, 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 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 revenue growth and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- T's revenue growth has slightly outpaced the industry average of 2.2%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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.
- The gross profit margin for AT&T INC is rather high; currently it is at 55.24%. 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 9.82% trails the industry average.
- AT&T INC's earnings per share declined by 12.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.19 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.53 versus $1.19).
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Diversified Telecommunication Services industry average. The net income has decreased by 12.4% when compared to the same quarter one year ago, dropping from $3,652.00 million to $3,200.00 million.
- Even though the current debt-to-equity ratio is 1.12, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.48 is very low and demonstrates very weak liquidity.
- You can view the full analysis from the report here: T Ratings Report