The Motley Fool fool.com 02 Aug, 2022 02:15 am

Why AT&T Dropped 10.4% in July

Why AT&T Dropped 10.4% in July
The company gave out disappointing cash flow guidance for its recent earnings report.

The telecommunications giant reported earnings that were better than analysts expected but gave a bleak forecast for free cash flow generation in 2022.The lowlight from the report was management's guidance for cash flow generation this year.Higher capital expenditures needed for building 5G infrastructure and customers delaying payments due to a softening economy caused AT&T to drop its full-year free cash flow guidance from $16 billion to $14 billion.Seeing as free cash flow is the true measure of profitability for a business and that AT&T will need a healthy dose of it to pay down all its debt, it is no surprise investors reacted negatively to this news.

Now what AT&T investors are nervous about the company's cash flow forecasts because of how much debt is on its balance sheet.9 billion in net debt, which is over nine times its free cash flow projections for 2022.

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