AT&T Is a Buy-the-Dips Stocks -- and That Was a Dip

BALTIMORE (TheStreet) -- The $179 billion telecom company, AT&T  (T), is seeing one of its typical high-volume sessions this afternoon, but this one's a little different. 


That's because AT&T is bouncing off a key technical support level this week, catching a bid yesterday off the bottom of an uptrend that's been propelling shares higher in recent months. Put simply, AT&T looks like a "buy-the-dips stock" right now, and yesterday was a dip.

In addition, TheStreet Ratings team rates AT&T as a buy with a ratings score of B+. TheStreet Ratings team has this to say about its recommendation:

"We rate AT&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 and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."


Highlights from the analysis by TheStreet Ratings team includes:

    • T's revenue growth has slightly outpaced the industry average of 2.9%. 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 a share.
    • The gross profit margin for AT&T is high; currently it is at 55.24%. Regardless of AT&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 earnings a 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 a 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.
    • Although 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. Although the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.48 is very low and demonstrates very weak liquidity.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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