Verizon Matches Profit Expectations; Beats On Revenue
Verizon Communication, Inc. (NYSE: VZ – $47.44) reported second-quarter earnings of $0.96 a share, on par with estimates and higher than the year-ago figure of $0.94, on a better-than-expected top-line performance. Investors seemed pleased with the results, with Verizon stock up about 7% on the news.
In the June quarter, the wireless segment posted a 1.9% drop in revenues (a good bit better than the 5.1% decrease reported in the March period), which may be attributed to more customers continuing to choose unsubsidized device payment plans, decreased overage revenues, lower postpaid customers and continued promotional activity. The percentage of phone activations on device payment plans was about 77% in the quarter, compared to 76% three months ago. Management expects this metric to remain constant during the third quarter of this year. Verizon reported a net increase of 614,000 wireless postpaid connections in the June quarter, a dramatic improvement on the net decline of 307,000 postpaid connections in the March period, with much of the good news attributable to the recent launch of Verizon Unlimited. As a result, Verizon’s total number of retail postpaid connections now sits at 109.1 million, up 1.2% year over year and indicates good customer loyalty despite strong competition. Separately, total revenues for the Wireline divisions’ FiOS fiber-optic-based services were up 4.4% year-over-year, thanks to solid demand in both consumer and business markets.
Verizon remains quite active on the acquisition front. The company closed on the $4.48 billion purchase of Yahoo! on June 13 and it announced that it had inked fiber purchase agreements with Corning and Prysmian to extend the company’s network lead and positions it to deliver new multi-use fiber services, including 5G, while complementing small-cell deployment. In sum, Verizon remains on track to post 2017 earnings of about $3.75 a share with a modest increase in the cards for the following year to about $3.80. This blue-chip stock remains a decent choice for conservative portfolios, thanks to its impressive 5.2% dividend yield and attractive capital-appreciation potential over the next three to five years.