AT&T lowers outlook for free cash flow: CEO explains why

AT&T Inc (NYSE: T) reported better-than-expected profit for its fiscal second quarter on Thursday. Shares still slid close to 10% on lowered outlook for full-year free cash flow.

Notable figures in AT&T Q2 report

• Net income printed at $4.1 billion versus the year-ago figure of $1.5 billion
• Per-share earnings of 56 cents were sharply better than last year’s 22 cents
• Adjusted EPS stood at 65 cents, ahead of the FactSet consensus of 61 cents
• Operating revenue tanked 17% YoY to $29.6 billion; in line with estimates
• Added 316,000 subscribers to AT&T Fiber, as per the earnings press release

AT&T attributed the revenue decline to the video business it divested in Q3 of 2021. Postpaid phone net additions of 813,000 were the highest the telecom giant has seen in the second quarter in over a decade. Postpaid phone churn stood at 0.75%.

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AT&T now expects $14 billion in free cash flow

AT&T now forecasts a higher 4.5% to 5.0% increase in its full-year mobility service revenue. It, however, expects a lower $14 billion in free cash flow this year versus $16 billion it had guided for at its investor day. On CNBC’s “Squawk Box”, CEO John Stankey said:

Our postpaid phone net ads were best in ten years. That takes a little bit of cash. We also hit our year-end target in mid-band 5G spectrum deployment early. That’s a big change. We did over 2 million new connected locations in our Fiber build, which took a lot of capital.

The stock is down more than 10% from its year-to-date high. Wall Street currently rates “T” at hold.