Strong revenue momentum and operating results at Verizon Wireless highlighted second-quarter 2018 performance at Verizon Communications Inc. (NYSE: VZ = $51.10), which reported adjusted earnings per share of $1.20 for the period, six cents ahead of consensus and $0.25 better than a year-ago. Total operating revenue rose to $32.20 billion from $30.55 billion last year and topping views of $31.79 billion. The Wireless unit added 398,000 net new subscribers who pay a monthly bill on a net basis, beating analysts’ average estimate of 352,000. Total Wireless revenues were $22.3 billion, an increase of 4.7% compared with 2017. Segment operating income was $8.3 billion, and operating income margin on total revenues was 36.9%. In Wireline, Verizon added a net of 43,000 FIOS Internet connections, but lost 37,000 video connections amid pressures from cord-cutting of video bundles, leading to a segment operating loss of $19 million. In Verizon’s media business, revenue was $1.9 billion in the second-quarter, which was relatively flat from the first quarter.
Looking ahead, management is predicting full-year consolidated revenue growth at low-to-mid single-digit percentage rates on better-than-expected mobile equipment revenue trends. Full-year earnings should top $4.60 per share, which translates into a forward multiple of 11.1 times. Hence, I believe the shares are quite undervalued at current levels. The stock also yields over 4.6%, thanks to a healthy $2.36 per share dividend providing conservative investors with decent long-term total return potential.