In light of the ongoing coronavirus pandemonium, AT&T Inc. T announced yesterday that it has secured a $5.5-billion term loan at competitive rates with 12 banks for additional financial flexibility to an already strong cash position. The company’s shares have moved up 2.2% in the last trading session. The Dallas, TX-based wireless carrier, which had almost $12 billion in cash in hand at the end of 2019, stated that the loans are pre-payable without penalty.
Amid the COVID-19 pandemic, the company is committed to reap benefits from its $15-million revolving credit facility, with no plans to use it this year. In the meantime, AT&T has been targeted by shareholders over its decision to purchase DirecTV for $49 billion in 2015 and Time Warner for $85 billion in 2018. Notably, the company had $151,709 million of long-term debt at 2019-end.
That said, the telecom and media giant is running on all cylinders to improve its liquidity position during this hour of crisis. Last year, the company shouldered on an aggressive sell-off strategy to pare down its heavy non-core assets, while unloading its debt burden. With revenues from the sale of its towers and real estate, the wireless carrier had sold its majority stake in Central Media Enterprises in October 2019 and expects to generate about $2 billion when the deal closes at the end of 2020. AT&T also informed that it will not terminate the payment of its quarterly dividend to investors.
As the deadly virus brings the global entertainment industry to a standstill, several companies like Comcast CMCSA and Walt Disney DIS have joined the bandwagon with AT&T to leverage the bond markets for additional cash. Primarily, AT&T has decided to scale down its operations by resorting to effective workforce management technique like layoffs. With increased network investments, debt retirement initiatives and dividend payments, the company is likely to generate adequate cash from operations as the global economy strives to recover from this downturn.
AT&T retracted its plans to purchase $4 billion in share buybacks. Earlier, the company announced that it had entered into an accelerated share repurchase agreement with Morgan Stanley MS to repurchase $4 billion of stock during the second quarter. However, the contagious disease and its grave impact on the economy have compelled the company to reconsider the same.
Among the factors that could impact its results are the effectiveness of COVID-19 mitigation measures, global economic conditions, consumer spending, work from home trends and supply chain sustainability. These factors could result in increased or lower demand for the company’s products and services as well as impact its ability to serve customers. AT&T is scheduled to report first-quarter 2020 results on Apr 22, before the opening bell.
AT&T’s shares have lost 5.3% compared with the industry’s decline of 2.2% in the past year. With a forward P/E ratio of 8.6, the company topped earnings estimates thrice in the trailing four quarters and met the same in the remaining quarter. It has a trailing four-quarter positive earnings surprise of 0.9%, on average.
AT&T currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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