AT&T recently shared its free cash flow guidance for the third quarter, and investors are showing positive reactions to this announcement. At a Bank of America conference, AT&T's Chief Financial Officer, Pascal Desroches, stated that the company expects to deliver between $4.5 billion and $5 billion in free cash for the current quarter, ending in September. Furthermore, AT&T reiterated its full-year free cash flow guidance of $16 billion or more. It's worth noting that this forecast was initially set in January and has been consistently reaffirmed during various conferences and earnings calls.
This positive news has had an immediate impact on AT&T's stock prices. In premarket trading on Thursday, the stock rose almost 2%, reaching $14.90.
However, it is crucial to note that the third quarter's free cash flow should not come as a surprise. Based on AT&T's performance in the first two quarters, where it generated approximately $5 billion, the company is now required to make up for the remaining $11 billion in the third and fourth quarters combined to meet its full-year guidance. Analysts who closely follow AT&T anticipate that the company will generate $4.955 billion in free cash flow for the third quarter and the remaining amount in the fourth quarter.
For telecom stocks, free cash flow is a significant metric to monitor, as it directly affects dividend payments. Investors highly value dividends that are paid out from free cash flow. Currently, AT&T pays out $1.12 in annual dividends per share, which is a decrease from $1.35 in 2022 and a five-year average of $1.86 after its separation from WarnerMedia.
In conclusion, AT&T's projection of robust free cash flow for the third quarter has garnered positive attention from investors. The company's stock prices reflect this optimism. It will be interesting to see if AT&T can deliver on its full-year guidance of $16 billion or more, as it looks to make up for the shortfall in the first two quarters.