Telecommunications giant Verizon Communications, Inc. (NYSE: VZ – $54.76) posted a decline in its top and bottom lines but was able to beat analysts’ expectations on profits. The provider of communications, Internet and TV services and entertainment products posted adjusted earnings per share of $0.94 per share in the quarter down from $1.04 per share in the prior-year period but above the $0.92, mean consensus estimate. Total operating revenue for the period came in at $30.53 billion, 5.3% below the $32.24 billion posted in the corresponding period of the prior year and just below the $30.97 billion projected by analysts. The company said that excluding second-quarter 2015 revenues from divested local landline businesses and second-quarter 2016 revenues from AOL, which was not part of Verizon a year ago, total operating revenues on a comparable basis would have declined 3.5% year-on-year. The company reported 615,000 retail postpaid net mobile additions in second-quarter and said that at the end of the quarter, Verizon had 113.2 million retail connections, representing a 3.3% year-on-year increase.
The company believes that 2016 adjusted earnings are expected to be at a level comparable to 2015, excluding the 7-cent-per-share impact of the 2016 work stoppage, which will probably end up with a per share figure close to $3.88, around 14 times the current share price. The impact of the Yahoo! acquisition will not take effect until fiscal 2017. Verizon stock, in my opinion, offers worthwhile capital appreciation potential over the coming 3 to 5 years as it is reasonably valued at current levels. In addition, income-seeking investors are likely to find the $2.26 annual dividend – yielding 4% – appealing as well.