AT&T: How Is My 2012 Top Pick Doing?

Jan.24.12 | About: AT&T Inc. (T)

Back on November 21, 2011 I put myself out there with an early call for my 2012 "Pick of The Year". (Review here.) The article itself was very well received from all different sides of the fence and the comments were wonderful and helpful for everyone.

We are coming close to "booking" the first month of 2012 (hard to believe actually) and taking a peek at how I am doing is always a fun idea. Perhaps not for me, but lots of folks like to see the authors here held accountable with a look at their track record.

AT&T (NYSE:T) Developments

At the time I wrote the first article, the T-Mobile merger was still cooking and it looked like it was going to be pulled off. Obviously it did not happen, and T had to pony up about 4 BILLION bucks. That's quite a sum of money to fork over to get nothing in return, and it comes directly from the bottom line. T chose to take the write off immediately, even before it had the final verdict, and took the funds out of the AT&T coffers.

Needless to say, the negative doom and gloom crowd came out of the woodwork (read this) with news reports, negative articles, and the Sprint (NYSE:S) and Verizon (NYSE:VZ) flag wavers were out in force. (I particularly loved this one.) The fact of the matter is that while 4 billion dollars is an amazing sum of money, it took T less than 2 weeks to make it back. Now THAT is amazing as well.

After the body blow, T went to work. They expanded their wireless network infrastructure, promised a slew of new high speed products at CES (read this), strengthened relationships with Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), Apple (OTC:APPL), and others, and raised its dividend by 9%. Not bad for a company that was close to being "written off" just about a month ago.

The really interesting development was the PPS activity for us, the investors.

At the time I wrote the original article, AT&T had a share price of about $28/share (before ex-dividend). Let's take a look at the most recent chart:

click to enlarge

AT&T, Inc. (<a href='' title='AT&T Inc.'>T</a>)

At $30.40/share (post ex dividend), T is up about 8% since the "devastating" news of the failed merger, and the 4 billion dollars it had to fork over. The dividend yield stands at 5.80%, with the increase, even at today's share price, and they are in expansion mode while hitting on all cylinders.

With 37 billion dollars in cash flow, T can toss its significant weight around in many different directions, and it has been doing just that. It will be quite interesting to see AT&T's earnings in a few days, (1/26/2012) and listen to their conference call for any forward guidance they might offer.

The low to high earnings estimates have a wide range, from $.34/share to $.58/share, so the numbers should be very revealing.

I will just take a guess, and say T will be "in line" with estimates. That would be pretty good with all of the negatives AT&T has faced in such a short period of time.

As a point of interest, Sprint's PPS was about $2.60/share when they did a "victory dance". Today the PPS is $2.25/share. Perhaps they "danced" too fast?

My Opinion

Ok, so T has had some "issues". They have survived and have seemed to move on sprightly. My "Pick of 2012" is intact, and I believe I have defended my position thoroughly.


Disclosure: I am long T.