NEW YORK -- AT&T Corp. outperformed all other stocks in the Dow Jones industrial average in the fourth quarter, amid optimism that the company's new chief executive, Michael Armstrong, is moving quickly to reverse the company's profit decline.
It was the second consecutive quarter that AT&T beat the other 29 companies in the index. AT&T shares rose 41 percent for the quarter, and 77 percent for the second half, while the Dow index was virtually unchanged for the quarter and rose only 3.3 percent for the half.
When Armstrong was chosen in October to lead the telecommunications company, he said he wanted AT&T to have the lowest costs in the phone industry. In recent meetings with analysts, he's indicated that he won't waste any time making zTC that happen. For investors, that signaled a change from the foot-dragging and indecisiveness they've seen before at AT&T.
"The view was that this was a rudderless ship. Now, it's not," said Robert Torray, chairman of Robert E. Torray & Co., which owned 654,300 AT&T shares as of Sept. 30.
AT&T's recent rise is in contrast to its decline of 15 percent in the first half of the year. AT&T shares fell $1.3125 yesterday to $61.3125.
For the year, AT&T shares have risen 51 percent, making them the fourth-best performer in the Dow, after those of Travelers Group Inc., Wal-Mart Stores Inc. and American Express Corp. with 78 percent, 74 percent and 58 percent rises, respectively. The Dow index has risen 22 percent.
Armstrong said early last month that cutting AT&T's administrative costs would be his first target. Selling, general and administrative expenses eat up 29 percent of AT&T's revenue, compared with less than 25 percent at some of its competitors.
Armstrong is expected to cut SG&A expenses by $2 billion to $3 billion a year, boosting earnings 75 cents to $1 a share, according to analysts Blake Bath at Lehman Brothers Inc. and Tod Jacobs at Sanford C. Bernstein.
In the third quarter, AT&T's profit from operations was $1.15 billion, or 71 cents a share, reversing a yearlong trend of declining profits.
Pub Date: 1/01/98