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Verizon (VZ) Meets Q1 Earnings, Lags Revenues Estimate

Verizon Communications Inc. VZ is the largest telecom operator in the U.S. providing high-end wireless and wireline services to individuals, business enterprises and government agencies.

The U.S. telecom industry is facing severe competitive pressure at present. Aggressive pricing competition and higher promotional activities are likely to hurt the company’s financial results. Verizon has predicted flat year-over-year earnings for 2016 as it does not see enough variables to deliver growth in the coming year. However, the company expects to return to growth trajectory starting 2017.

Verizon is presently focusing on online content delivery, mobile video and online advertising for growth. In this regard, the acquisition of AOL and Millennium Media and the launch of its new mobile video service named “Go90” should generate significant revenues for the company in the quarter.

Launch of Wi-Fi calling feature on select phones upon receiving temporary go-ahead from the FCC should bolster the company’s performance in the to-be-reported quarter. Further, gradual rollout of FiOS Internet, increasing market penetration of 4G LTE services, higher sale of smart devices and initiatives on the Internet of Things front should also drive the company’s earnings in the fourth quarter.

Verizon currently carries a Zacks Rank #3 (Hold). The company has generated a positive average earnings surprise of 3.36% in the previous four quarters. We have highlighted some of the key stats from this just-revealed announcement below:

Earnings: The Company meets first quarter earnings. Our consensus called for EPS of $1.06 was exactly in line with the company reported EPS.

Revenue: Verizon reported total revenue of $32,171 million missing the Zacks Consensus Estimate of $34,406 million.

Key States to Note: In the reported quarter, Verizon added 0.64 million retail postpaid connections. Retail postpaid churn declined to 0.96% from 1.03% in the prior-year quarter. At the end of first quarter, Verizon had 112.573 million retail connections, up 3.7% year over year.

Stock Price: At the time of writing, the stock price of Verizon was down 1.57% in the pre-market trade on NYSE. Clearly the initial reaction to the release is negative. This may due to weak top-line result and continuation of strike called by workers of the company’s wireline division. Management stated that there will be pressure on second-quarter earnings due to the timing of cost reductions as a result of labor contract negotiations.

Check back later for our full write up on this Verizon earnings report later!

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