Why AT&T Stock Lagged the Market Today

The stock market was in rally mode on Wednesday, but you wouldn't know it from AT&T's (NYSE: T) performance. Investors reacted to the company's latest set of quarterly earnings but traded the stock up less than 1%, while the fiery S&P 500 index notched a nearly 2% Hump Day gain.

Calling on a mixed first quarter

AT&T's first quarter saw the incumbent telecom earn $30.6 billion in revenue, up 2% from the same period of 2024. The company attributed this to higher take for its mobility and consumer wireline segments, offset by drops in its business wireline and Mexico business. The latter, it said, was affected by foreign exchange movements.

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On the bottom line, net income according to GAAP standards leaped 25% higher to almost $4.7 billion. On a non-GAAP (adjusted), per-share basis AT&T's profitability was $0.51, again an improvement (first-quarter 2024 result: $0.47).

While the net income pop was impressive on the surface, analysts tracking the stock were expecting slightly better. Their consensus estimate was $0.52 per share; however, the company topped the average revenue forecast of less than $30.4 billion.

The muted investor reaction to this performance was likely also due to an apparent lack of strategy for current macroeconomic challenges.

When asked about the potential impact of the current set of tariffs imposed by the U.S. on foreign trading partners, AT&T's CEO John Stankey admitted that these could result in higher costs for hardware and related equipment.

"Unfortunately for the customer, we're going to have to come up with some new ways for them to figure out how to digest that increase in pricing," Stankey said, but did lay out any plan for how the company might cope with this.

Narrow miss on bottom-line guidance

AT&T also proffered guidance for the entirety of this year, writing that it anticipated consolidated service revenue to rise by a low single-digit percentage over the 2024 result. Adjusted earnings per share should come in at $1.97 to $2.07. The average analyst estimate for the latter, however, is $2.09.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.