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Verizon (VZ) Q2 Earnings In Line, Revenues Beat Estimates

Verizon Communications Inc. VZ reported mixed financial numbers in the second quarter of 2017. While the top line outpaced the Zacks Consensus Estimate, the bottom line met the mark.

Quarterly GAAP net income was $4,478 million or $1.07 per share compared with $831 million or 17 cents per share in the year-ago quarter. Adjusted earnings per share came in at 96 cents in the reported quarter, in line with the Zacks Consensus Estimate.

Total revenue increased 0.1% year over year to $30,548 million beating the Zacks Consensus Estimate of $29,907 million.

Total operating expenses in the second quarter of 2017 were $22,316 million, down 14.1% year over year. Operating income came in at $8,232 million compared with $4,554 million in the year-ago quarter. Adjusted EBITDA was $12,399 million compared with $8,536 million in the prior-year quarter.

Cash Flow & Liquidity

In the first half of 2017, Verizon generated $9,918 million of cash from operating activities compared with $12,908 in the year-ago period. Free cash flow in the reported period was $2,907 million compared with $5,635 million in the prior-year quarter. At the end of the second quarter of 2017, Verizon had $4,583 million in cash and $117,543 million in long-term debts compared with $2,880 million and $108,078 million, respectively, at the end of 2016. The debt-to-capitalization ratio was 0.81 at the end of the second quarter of 2017, flat with the 2016-end figure.

Wireless Segment

Total revenue was $21,282 million, down 1.9% year over year. Service revenues dropped 6.7% to $15,622 million. Equipment revenues increased 16% to $4,298 million. Other revenues totaled $1,362 million, up 8.2%.

Operating expenses increased 1.4% to $13,872 million. Operating income declined 7.6% to $7,410 million. Quarterly operating income margin was 34.8% compared with 36.9% in the year-ago quarter. Segment EBITDA decreased 5.3% to $9,757 million. EBITDA margin was 45.8% compared with 47.5% in the prior-year quarter.

As of Jun 30, 2017, Verizon had 112.536 million retail subscribers, up 1.2% year over year. Of the total, retail postpaid subscriber count was 109.088 million, up 1.2%. Meanwhile, retail prepaid user count was 5.448 million, up 1.4%. In the reported quarter, the company gained 0.614 million postpaid customers and 0.019 million prepaid customers.

Quarterly retail postpaid churn rate was 0.94%, flat year over year. Total retail churn rate was 1.18% compared with 1.19% in the year-ago quarter. Of the total activated phones, smartphones accounted for 95.2% compared with 92.1% in the prior-year quarter. Retail postpaid ARPA (average revenue per account) was $134.89 compared with $145.09 in the year-ago quarter.

Wireline Segment

Total revenue at the segment was $7,802 million, up 1.2% year over year. Consumer retail revenues were up 0.6% to $3,184 million. Enterprise Solutions revenues contracted 0.4% to $2,388 million. Partner Solutions revenues dropped 0.4% to $1,236 million. Business Markets revenues grossed $921 million, up 9%. Other revenues decreased 13.1% to $73 million.

Operating expenses decreased 6.1% to $7,734 million. Quarterly operating income was million against an operating loss of $524 million in the year-ago quarter. Quarterly operating margin came in at 0.9% as opposed to an operating loss of 6.8% in the year-ago quarter. Segment EBITDA was up a whopping 58.5% to $1,620 million. EBITDA margin was 20.8% compared with 13.3% in the year-ago quarter.

As of Jun 30, 2017, FiOS video subscriber base was 4.666 million (up 0.6% year over year), FiOS Internet subscriber count was 5.737 million (up 4.4%) and FiOS digital voice residence connections totaled 3.909 million (up 0.8%). During the quarter, Verizon lost 15,000 FiOS video subscribers while gaining 22,000 FiOS digital voice residential connections and 49,000 FiOS internet subscribers.

High-speed internet connection dropped 17.6% year over year to 1.251 million while total broadband connection number was pegged at 6.988 million, down 0.4%. Primary residence switched access connections decreased 15.4% to 2.962 million and Primary residence connections fell 6.9% to 6.871 million. Total retail residence voice connections declined 7.3% to 7.079 million and total voice connections contracted 7.8% to 13.352 million.

Verizon Communications Inc. Price, Consensus and EPS Surprise

 

Verizon Communications Inc. Price, Consensus and EPS Surprise | Verizon Communications Inc. Quote

Recent Developments

Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company is facing intense competitive pressure from rivals like AT&T Inc. T, T-Mobile US Inc. TMUS and Sprint Corp. S. In order to counter this, the company has been focusing on generating revenues from video streaming services and digital advertising. Keeping with this strategy, it acquired AOL, Millennium Media and internet-based assets of Yahoo.

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