Here’s Why AT&T Stock (T) is Gaining Ahead of Q2 Results

AT&T (T) stock rose nearly 2% following rival Verizon's (VZ) better-than-expected Q2 results, which included $34.5 billion in revenue (+5.2% YoY), $1.22 adjusted EPS (+6.1%), and raised 2025 free cash flow and profit forecasts. This 'sympathy rally' suggests broader strength across the U.S. telecom sector, indicating AT&T may also benefit from favorable market trends ahead of its own Q2 earnings. Analysts, including RBC Capital, anticipate AT&T will report increased consumer wireless broadband users and potentially higher free cash flow due to the extension of bonus depreciation.

Analysis

AT&T (T) shares experienced a sympathy rally, climbing nearly 2% in response to competitor Verizon's (VZ) strong second-quarter results and upgraded full-year guidance. Verizon's performance, which included a 5.2% year-over-year revenue increase to $34.5 billion and a 6.1% rise in adjusted EPS to $1.22, is being interpreted as a positive indicator for the broader U.S. telecom sector. This suggests that key market drivers, such as robust consumer demand for premium wireless plans and resilient pricing power, are likely benefiting AT&T as well ahead of its own Q2 earnings announcement. Analyst sentiment reinforces this outlook, with RBC Capital forecasting an increase in AT&T's consumer wireless broadband net additions for the quarter. Furthermore, a significant structural tailwind has emerged from the extension of bonus depreciation, which analysts project could increase free cash flow estimates by as much as 9% for AT&T. This optimism is reflected in the current Wall Street consensus, which holds a 'Strong Buy' rating on the stock with an average price target of $30.71, implying a 12.1% upside potential.

Key Decisions for Investors

• Investors should monitor AT&T's upcoming Q2 earnings for confirmation of the positive sector trends, focusing on wireless net additions and any commentary on pricing power.
• Consider the potential for a material free cash flow uplift from the extension of bonus depreciation, as this is a key factor that may not be fully priced into current valuations.
• Given the stock's recent gain on positive sentiment and the 'Strong Buy' consensus, be aware that market expectations are now elevated, creating a higher bar for AT&T to meet or exceed in its report.