Salomon Cuts AT&T '01 Revenue, EPS Views, Target Price
Dow Jones Newswires
By John Shipman 5/17/00
NEW YORK -- Shares of AT&T Corp. (T) were lower in early trading Wednesday after Salomon Smith Barney analyst Jack Grubman lowered his 2001 revenue and earnings per share views, and cut his target price to $65 from $75.
Shares of AT&T were recently down 1 3/8, or 3.5%, to 37 3/8 on volume of 9.2 million shares.
In a summary of a research note issued Wednesday, Grubman said he is lowering '01 revenue and EPS estimates "to reflect year-long fix in business and likely continued pressure on consumer."
Total revenue growth estimates were lowered to 7.9% from 9.9%. Business revenue growth was adjusted to between 8% and 8.5% from 9.6%, and growth in consumer revenue is seen declining 7%, versus a decline of 5.3%.
According to Grubman, AT&T will earn $2.55 per share in '01, versus his previous estimate of $2.75. The report attributes lower EPS to higher sales, general and administrative costs, "primarily due to expansion of business sales staff."
Grubman's new '01 price target is $65 per share, down from $75, "reflecting lower cash EPS estimates."
Estimates for the wireless and broadband units remain unchanged.
Salomon issued the Wednesday report "upon further reflection on AT&T's first-quarter results," it said. "We are updating our model to reflect the reality that problems in the business segment should not be a quick fix and that declines in consumer services are not likely to abate."
Salomon analyst Grubman's report indicates that AT&T's biggest challenge is to "fully participate in the growth of business communications services, especially data/IP." He said the company plans to hire 600 data-focused sales people, "who are difficult to find these days," and it could "easily" take four to six quarters for it to "get its sales practices and data/IP products in line and grow."
In a November research note, Grubman raised his rating on AT&T from neutral to buy. "Now that we are convinced of the technological feasibility, scalability, and economics of cable initiatives, we are recommending the stock," he said in the November note.
Critics have indicated that the upgrade was motivated by Salomon's desire to take part in the initial public offering of AT&T Wireless tracking stock, which Grubman reportedly denies.
The analyst was not immediately available for comment.
Salomon, Goldman Sachs & Co. and Merrill Lynch & Co. led the 25-firm team of underwriters on the AT&T Wireless offering, which took effect in late April. The deal generated $10.62 billion for AT&T and was the largest IPO in U.S. history. |
