Verizon Communications, Inc. (NYSE: VZ – $49.81) reported a profit of $4.31 billion, or $1.06 a share, up from $4.22 billion, or $1.02 a share a year earlier, in line with the expectations of analysts. Revenue was uninspiring, however, and edged up only 0.6% to $32.17 billion, below analysts’ estimates for $32.5 billion. The revenue boost came from the company’s acquisition of AOL Inc. last year—excluding AOL, which posted its highest first-quarter revenue in five years, Verizon said revenue would have declined 1.5%. As is typically the case, Verizon Wireless was responsible for much of the bottom-line improvement. During the March quarter, VZ Wireless added 640,000 retail postpaid net subscribers, bringing the company’s total number of retail connections to 112.6 million, up 3.7% from a year earlier. Postpaid churn, or the rate at which customers canceled service, fell to 0.96%, a year-over-year improvement of 7 basis points. Meanwhile, growth at its FIOS TV and high-speed Internet business continued to slow and managed an increase of only 1%. Traditional wireline services, however, continued to decline falling 2% from a year ago as Verizon continues to shed properties.
The company appears interested in Yahoo, but a deal is far from certain given Yahoo’s problems. Verizon is looking to replace the explosive growth it has enjoyed in cellphone revenue over the past few years with a move to more media content for mobile devices. A tie up with Yahoo, if the price is right, would blend well with the company’s AOL offerings. These high-quality shares, down nearly 4% on the first quarter results, would make a good addition to most portfolios. And the dividend yield of 4.4% adds to VZ’s risk-adjusted total-return appeal for both conservative and income accounts over the long-term.