Telecommunications conglomerate AT&T (NYSE:T) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, but sales were flat year on year at $32.3 billion. Its non-GAAP profit of $0.54 per share was 6.1% above analysts’ consensus estimates.
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AT&T (T) Q4 CY2024 Highlights:
- Revenue: $32.3 billion vs analyst estimates of $31.94 billion (flat year on year, 1.1% beat)
- Adjusted EPS: $0.54 vs analyst estimates of $0.51 (6.1% beat)
- Adjusted EBITDA: $10.8 billion vs analyst estimates of $10.82 billion (33.4% margin, in line)
- Operating Margin: 16.5%, in line with the same quarter last year
- Free Cash Flow Margin: 14.9%, down from 19.9% in the same quarter last year
- Market Capitalization: $163 billion
Company Overview
Founded by Alexander Graham Bell, AT&T (NYSE:T) is a multinational telecomm conglomerate providing a range of communications and internet services.
Wireless, Cable and Satellite
The massive physical footprints of cell phone towers, fiber in the ground, or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their landlines and traditional cable subscriptions in favor of wireless communications and streaming video. These trends do mean that more households need cell phone plans and high-speed internet. Companies that successfully serve customers can enjoy high retention rates and pricing power since the options for mobile and internet connectivity in any geography are usually limited.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Over the last five years, AT&T’s demand was weak and its revenue declined by 7.6% per year. This fell short of our benchmarks and is a sign of poor business quality.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. AT&T’s revenue over the last two years was flat, sugggesting its demand was weak but stabilized after its initial drop in sales. 
We can dig further into the company’s revenue dynamics by analyzing its most important segment, Mobility. Over the last two years, AT&T’s Mobility revenue (wireless plans) averaged 2.1% year-on-year growth. This segment has outperformed its total sales during the same period, lifting the company’s performance.
This quarter, AT&T’s $32.3 billion of revenue was flat year on year but beat Wall Street’s estimates by 1.1%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn't excite us and implies its newer products and services will not accelerate its top-line performance yet.
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Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
AT&T has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14% over the last two years, better than the broader consumer discretionary sector.
AT&T’s free cash flow clocked in at $4.8 billion in Q4, equivalent to a 14.9% margin. The company’s cash profitability regressed as it was 5 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Over the next year, analysts predict AT&T’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 14.4% for the last 12 months will increase to 15.6%, giving it more flexibility for investments, share buybacks, and dividends.
Key Takeaways from AT&T’s Q4 Results
It was encouraging to see AT&T beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 1.4% to $23.02 immediately after reporting.
So should you invest in AT&T right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
