HomeMost PopularAT&T vs. Verizon: Which Stock is a Better Buy After Q3?

AT&T vs. Verizon: Which Stock is a Better Buy After Q3?

Actionable Trade Ideas

always free

Over the past 25 months, the telecommunications industry has faced significant challenges. Factors such as low returns on invested capital, high capital expenditure demands, rising interest rates, the potential entry of Amazon into the sector, and an inquiry by the Justice Department and EPA into lead cables have all contributed to the sector’s struggles.

In this article, we will compare two leading telecom stocks – AT&T and Verizon – to assess their Q3 performance and determine which stock is a better investment option. Let’s dive into the details.

AT&T Q3 Earnings Results

AT&T reported a strong third quarter, with impressive free cash flow generation leading to an upward revision of their 2023 guidance. Although wireless customer trends were not as strong as the previous year, they showed improvement, indicating steady growth and increased cash flow for wireless providers like AT&T.

While there was a decline in net postpaid phone customers year-over-year, the company has regained its share of industry growth following the loss of a large enterprise customer. Other positive highlights include revenue per customer growth, improved wireless EBITDA margin, and strong free cash flow generation.

Despite these positives, AT&T’s topline growth remains anemic, and adjusted EPS and cash flow from operations showed only minimal growth. The company appears to be stuck in a low-growth mode for the foreseeable future.

Verizon Q3 Earnings Results

Verizon’s Q3 performance impressed investors, with the stock surging after the results release. The company generated significant cash flow and increased their full-year cash flow guidance. Key highlights include net year-over-year postpaid phone customer growth, an increase in average revenue per consumer postpaid wireless account, and a reduction in debt.

However, similar to AT&T, Verizon’s growth remains weak, with revenue declining and adjusted EBITDA showing minimal improvement year-over-year in Q3.

AT&T vs. Verizon: Dividend Analysis

Both AT&T and Verizon have limited dividend growth prospects in the coming years as they focus on investing in their capital-intensive businesses and deleveraging their balance sheets. While their leverage ratios are similar, Verizon’s dividend track record is more impressive, having increased their dividend for 17 consecutive years.

Despite the slightly higher payout ratio, Verizon’s management appears more committed to future dividend growth compared to AT&T’s management. This, coupled with their track record, instills more confidence in investors.

T Stock vs. VZ Stock: Valuation Analysis

When comparing the valuation of the two stocks, AT&T appears slightly more attractive based on price-to-earnings (P/E) ratios and EV/EBITDA multiples. Historically, AT&T has shown better value compared to Verizon. However, Verizon offers a higher dividend yield, making it more appealing to dividend investors.

T Stock vs. VZ Stock: Investor Takeaway

Both AT&T and Verizon face similar growth challenges but show improvements in free cash flow generation and deleveraging. While AT&T may offer a slightly more interesting value opportunity, Verizon is the clear choice for dividend investors. With a higher dividend yield, a track record of dividend growth, and more trustworthy management, Verizon stands out as the better investment option.

Overall, we rate both stocks as Buys, but if we had to choose one, we would recommend Verizon due to its higher dividend yield, growth potential, and reliable management.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.