By IB Times Staff Reporter: Subscribe to IB's RSS feed
October 26, 2010 10:25 AM EDT
Deutsche Bank expects AT&T (T) to announce a share buyback or dividend increase in the near-term as the company reiterated that its improved credit profile increases its financial flexibility and that buybacks are an option.
"We continue to expect a buyback of $8 billion (5 percent of shares) to be announced no later than the December board meeting. We also expect AT&T to increase its dividend for the 27th consecutive year during 4Q," analyst Brett Feldman wrote in a note to clients.
As of Sept.30, AT&T has about $3.25 billion in cash and cash equivalents.
The analyst also increased its price target and earnings estimates of AT&T, while maintaining his 'buy' rating on the stock.
Feldman, who increased price target on AT&T shares by $2 to $33, raised his 2010 earnings view to $2.27 a share from $2.26 a share and Wall Street expects earnings of $2.30 a share, according to analysts polled by Thomson Reuters.
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In addition, the analyst said stronger than expected iPhone upgrades reduce churn risk in 2011 if AT&T loses exclusivity for the device.
Speculations are already rife that iPhone will come to Verizon's network early next year. Texas-based AT&T has been the exclusive carrier for iPhone for more than three years.
Citing unnamed sources, the Wall Street Journal said Oct. 7 that Apple is gearing up to launch a CDMA-based iPhone in early 2011 on Verizon's network. Bloomberg also carried a story earlier this year, saying a Verizon iPhone is in the offing and could hit stores as early as January 2011.
It should be noted that Verizon Wireless will be selling Apple's iPad in its stores starting Oct. 28, possibly indicating that the iPhone will soon follow.
Feldman said iPhone sales of 5.2 million exceeded his estimate of 4.5 million and increased from 3.2 million in the second quarter. Out of these, 76 percent of iPhone sales were upgrades, implying AT&T is locking-in more subscribers than expected prior to the anticipated loss of exclusivity in 2011.
"This (strong iPhone upgrades) may reduce the risk to 2011 EPS, which we currently estimate at $0.12 (5 percent of our $2.51 est)," Feldman said.
Shares of AT&T closed Monday's regular trading session at $28.36 on the NYSE.
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