Shares of AT&T (T 1.02%) were falling today after strong phone subscriber additions were overshadowed by weak guidance for the new year.

After gaining yesterday in sympathy with a better-than-expected earnings report from Verizon, AT&T stock was down 2.9% as of 11:31 a.m. ET.

AT&T's fourth quarter was solid

Despite the pullback, AT&T delivered a solid quarter, topping estimates on the top line but missing slightly on the bottom line.

Wireless service revenue, the growth component of the business, was up 3%, which drove overall revenue up 2.2% to $32 billion, beating the consensus at $31.5 billion.

User growth was also solid, with 526,000 postpaid phone net adds in the quarter, meaning monthly contractual subscribers. 

AT&T also hit its full-year target of free cash flow of $16.8 billion, up $2.8 billion from the prior year, and fourth-quarter FCF came in at $6.4 billion. Adjusted earnings per share in the quarter fell from $0.61 to $0.54, which missed the consensus at $0.56.

CEO John Stankey said, "We accomplished exactly what we said we would in 2023, delivering sustainable growth and consistent business performance, resulting in full-year free cash flow of $16.8 billion, ahead of our raised guidance."

Guidance is better than it looks

For 2024, AT&T expects wireless service revenue growth of 3% and broadband revenue growth of 7%. It also forecast adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 3%. However, investors were disappointed that AT&T forecast a decline in adjusted earnings per share to $2.15-$2.25, though that includes a number of special items, including a $0.17 headwind due to higher depreciation expense from accelerated depreciation from its open radio access network transformation.

The company said it expected to return to adjusted EPS growth in 2025.

Even with the lower expected adjusted EPS, the stock trades at a price-to-earnings ratio of less than 8, which seems like a good price for a stock that now seems to be on the right track to slow but steady growth. It finally looks like the worst is behind AT&T.