How High Can AT&T Fly?

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Shares of AT&T (NYS: T) hit a 52-week high recently. Let's look at how it got here and whether clear skies are ahead.

How it got here
Ma Bell reported its first earnings release in the wake of its failed attempt to swallow No. 4 carrier T-Mobile in January. The botched deal was rather pricey, resulting in a $6.7 billion loss for the company.

On the bright side, it hit a new record with Apple (NAS: AAPL) iPhone activations. AT&T sold 7.6 million iPhones during the quarter, representing four out of every five smartphones sold during the quarter. The flip side of that coin is that margins took a hit when Cupertino extracted its typical toll.


The next earnings release showed a big sequential drop in iPhone sales, and reducing the margin-sucking effects of Apple's device helped AT&T beat estimates. This echoed Verizon's (NYS: VZ) report that also showed iPhone sales dropping. Meanwhile, Sprint Nextel (NYS: S) is betting huge on the device, committing to $15.5 billion in iPhone purchases over the next four years.

The last earnings report in particular has been a notable catalyst, as shares have gained 9% since.

How it stacks up
Let's see how AT&T compares to its largest peers.

T Chart

T data by YCharts

We'll add in some more fundamental metrics for more clues.

Company

P/CF (TTM)

Sales Growth (5-year rate)

Net Margin (TTM)

ROE (TTM)

AT&T8.515.0%3.4%3.8%
Verizon4.24.7%9.7%7.0%
Sprint3.8(3.9%)(9.7%)(26.8%)

Source: Reuters. TTM = trailing 12 months.

Verizon looks to be the strongest of the trio. Both Sprint and AT&T have made bold moves in recent years that have proven to be mistakes. AT&T-Mobile never materialized and Ma Bell's bottom line took a big hit as a result. Sprint bet big on 4G WiMAX, which ended up losing the 4G wars to LTE. Meanwhile, Verizon's sizable wagers on Google Android and LTE have both proven to be successful.

What's next?
AT&T is now shifting its attention to a new belle of its blue ball -- the Nokia (NYS: NOK) Lumia 900. It's putting all of its marketing weight behind it as its new exclusivity card, since it has lost that privilege with the iPhone. Besides, Apple is much more concerned with international iPhone sales nowadays anyway.

As AT&T continues to focus on non-iPhone devices, it could see its margins rise. But ultimately, the consumer has the final say on which device they take home.

Interested in more info on AT&T? Add it to your watchlist byclicking here.

At the time this article was published Fool contributorEvan Niuowns shares of Apple, Verizon Communications, and AT&T, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Google. The Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Google, Apple, and Nokia.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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