Verizon Revenue Falls; Earnings Disappoint
Verizon Communications, Inc. (NYSE: VZ – $50.34) posted another decline in revenue amid a continued drop-off in subscriber additions as a pricing war continues to drag on the wireless provider’s results. For the latest quarter, revenue slipped 5.6% to $32.34 billion, hurt by divestments as well as declines both in the wireless and wireline operations. Verizon posted a profit of $4.5 billion, or $0.86 a share on an adjusted basis, down from $5.39 billion, or an adjusted $0.89 a share, a year earlier and three cents less than Street expectations. Verizon’s FIOS TV and high-speed internet business, which had been lagging, continued to recover. Total revenue for the Wireline division’s fiber-optic-based services were up 4.4% year over year, driven by 68,000 net FiOS Internet connections and 21,000 net FiOS Video connections in the latest quarter. Verizon Wireless reported a 1.5% drop in fourth-quarter revenues, as more customers continued to choose unsubsidized device payment plans. The percentage of phone activations on device payment plans was about 77% in the December quarter, compared to about 70% in the September period. Management expects this percentage to remain constant during the first quarter of this year.
Verizon has been rather busy on the acquisition front of late. Management expects the purchase of Equinix to close in the second quarter of 2017, and the Yahoo acquisition, which has been cast into doubt by data breaches at the Internet company, still seems to be up in the air at the moment. In December, there were whispers on the Street that Verizon may demand better terms from Yahoo, after Yahoo disclosed that a breach in 2013 had exposed data from more than 1 billion user accounts and another 500 million in 2014. Verizon is still working with Yahoo to assess the financial impact of the breaches, with Yahoo expecting to wrap up the deal in the second quarter of this year. The shares shed about 4.5% in today’s trading on the results, but this high-quality stock would be a good selection for conservative portfolios, given its above-average dividend yield of 4.4%, strong finances and appealing 3- to 5-year appreciation potential.