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Why Is Verizon (VZ) Down 0.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Verizon Communications (VZ - Free Report) . Shares have lost about 0.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Verizon due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Verizon Tops Q4 Earnings Estimates on Wireless Traction
Verizon reported healthy fourth-quarter 2023 results with the top and bottom line beating the respective Zacks Consensus Estimate. The telecom giant is witnessing significant 5G adoption and wireless traction. Strong demand for fixed wireless products also led to healthy broadband performance with total broadband net additions of 413,000, including 375,000 fixed wireless net additions. Verizon witnessed solid momentum in the wireless business with 449,000 total postpaid phone net additions in the quarter along with retail postpaid net additions of 1,460,000.
Net Income
On a GAAP basis, net loss in the quarter was $2,573 million or a loss of 64 cents per share against $6,698 million or $1.56 per share in the prior-year quarter. The year-over-year decrease was primarily attributable to higher operating expenses led by a goodwill impairment charge of $5,841 million. Excluding non-recurring items, quarterly adjusted earnings were $1.08 per share compared with $1.19 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
For 2023, GAAP earnings declined to $12,095 million or $2.75 per share from $21,748 million or $5.06 per share in 2022. Adjusted earnings for 2023 were $4.71 per share compared with $5.18 in 2022.
Revenues
Quarterly total operating revenues decreased to $35,130 million from $35,251 million in the prior year owing to lower wireless equipment revenues driven by a challenging macroeconomic environment and lower postpaid phone upgrades. The top line beat the consensus estimate of $34,819 million. For 2023, revenues declined to $133,974 million from $136,835 million in 2022.
Quarterly Segment Results
Consumer: Total revenues from this segment improved 0.7% year over year to $26,954 million, as higher service revenues were partially offset by lower equipment revenues in the quarter. However, it exceeded our revenue estimate of $26,133.8 million for the segment led by solid wireless momentum. Service revenues were up 2.6% to $18,927 million, while wireless equipment revenues declined 1.4% to $6,435 million. Other revenues totaled $1,592 million, down 11.5% year over year.
The segment recorded 318,000 wireless retail postpaid phone net additions and 289,000 wireless retail prepaid net losses in the quarter. Wireless retail postpaid churn was 1.08%, while retail postpaid phone churn was 0.88%. The company recorded 53,000 Fios Internet net additions as high demand for reliable fiber optic broadband was spurred by higher video consumption. Fixed wireless broadband net additions were 231,000 for the quarter. However, Verizon registered 62,000 Fios Video net losses in the quarter, reflecting the ongoing shift from traditional linear video to over-the-top offerings. The segment’s operating income remained flat at $7,035 million with a margin of 26.1%. EBITDA increased 2.4% to $10,379 million with a margin of 38.5% compared with 37.9% in the prior-year quarter due to lower costs of wireless equipment.
Business: The segment revenues were down 3.6% to $7,618 million due to lower wireline and wireless equipment revenues, partially offset by growth in wireless service revenue. It also was lower than our estimates of $7,876 million largely due to challenging macroeconomic conditions. The segment had 292,000 wireless retail postpaid net additions in the quarter, including 131,000 postpaid phone net additions. Wireless retail postpaid churn was 1.48%, while retail postpaid phone churn was 1.12%. Fixed wireless broadband net additions were 144,000 for the quarter. Operating income declined to $443 million from $585 million in the year-ago quarter with respective margins of 5.8% and 7.4%. EBITDA was down 4.5% to $1,607 million owing to decline in high margin wireline revenues for a margin of 21.1% compared with 21.3% in the year-earlier quarter.
Other Quarterly Details
Total operating expenses increased 23.2% year over year to $34,530 million, while operating income was down 91.7% to $600 million. Consolidated adjusted EBITDA declined to $11,678 million from $11,747 million for respective margins of 33.2% and 33.3%.
Cash Flow & Liquidity
Verizon generated $37,475 million of net cash from operating activities in 2023 compared with $37,141 million in the year-ago period. The improvement was primarily due to working capital improvements driven by lower inventory levels, fewer phone upgrades and a modest improvement in customer payment patterns. Free cash flow was $4,074 million for the quarter compared with $1,666 million in the prior-year period. As of Dec 31, 2023, the company had $2,065 million in cash and cash equivalents with $137,701 million of long-term debt compared with respective tallies of $2,605 million and $140,676 million in the year-ago period.
Guidance
For 2024, Verizon expects wireless service revenue growth in the range of 2%-3.5%. Adjusted EBITDA is likely to grow 1. The company expects adjusted earnings in the range of $4.50 to $4.70 per share. Capital expenditure is estimated to be within the range of $17 billion and $17.5 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Verizon has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Verizon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Verizon (VZ) Down 0.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Verizon Communications (VZ - Free Report) . Shares have lost about 0.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Verizon due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Verizon Tops Q4 Earnings Estimates on Wireless Traction
Verizon reported healthy fourth-quarter 2023 results with the top and bottom line beating the respective Zacks Consensus Estimate. The telecom giant is witnessing significant 5G adoption and wireless traction. Strong demand for fixed wireless products also led to healthy broadband performance with total broadband net additions of 413,000, including 375,000 fixed wireless net additions. Verizon witnessed solid momentum in the wireless business with 449,000 total postpaid phone net additions in the quarter along with retail postpaid net additions of 1,460,000.
Net Income
On a GAAP basis, net loss in the quarter was $2,573 million or a loss of 64 cents per share against $6,698 million or $1.56 per share in the prior-year quarter. The year-over-year decrease was primarily attributable to higher operating expenses led by a goodwill impairment charge of $5,841 million. Excluding non-recurring items, quarterly adjusted earnings were $1.08 per share compared with $1.19 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
For 2023, GAAP earnings declined to $12,095 million or $2.75 per share from $21,748 million or $5.06 per share in 2022. Adjusted earnings for 2023 were $4.71 per share compared with $5.18 in 2022.
Revenues
Quarterly total operating revenues decreased to $35,130 million from $35,251 million in the prior year owing to lower wireless equipment revenues driven by a challenging macroeconomic environment and lower postpaid phone upgrades. The top line beat the consensus estimate of $34,819 million. For 2023, revenues declined to $133,974 million from $136,835 million in 2022.
Quarterly Segment Results
Consumer: Total revenues from this segment improved 0.7% year over year to $26,954 million, as higher service revenues were partially offset by lower equipment revenues in the quarter. However, it exceeded our revenue estimate of $26,133.8 million for the segment led by solid wireless momentum. Service revenues were up 2.6% to $18,927 million, while wireless equipment revenues declined 1.4% to $6,435 million. Other revenues totaled $1,592 million, down 11.5% year over year.
The segment recorded 318,000 wireless retail postpaid phone net additions and 289,000 wireless retail prepaid net losses in the quarter. Wireless retail postpaid churn was 1.08%, while retail postpaid phone churn was 0.88%. The company recorded 53,000 Fios Internet net additions as high demand for reliable fiber optic broadband was spurred by higher video consumption. Fixed wireless broadband net additions were 231,000 for the quarter. However, Verizon registered 62,000 Fios Video net losses in the quarter, reflecting the ongoing shift from traditional linear video to over-the-top offerings. The segment’s operating income remained flat at $7,035 million with a margin of 26.1%. EBITDA increased 2.4% to $10,379 million with a margin of 38.5% compared with 37.9% in the prior-year quarter due to lower costs of wireless equipment.
Business: The segment revenues were down 3.6% to $7,618 million due to lower wireline and wireless equipment revenues, partially offset by growth in wireless service revenue. It also was lower than our estimates of $7,876 million largely due to challenging macroeconomic conditions. The segment had 292,000 wireless retail postpaid net additions in the quarter, including 131,000 postpaid phone net additions. Wireless retail postpaid churn was 1.48%, while retail postpaid phone churn was 1.12%. Fixed wireless broadband net additions were 144,000 for the quarter. Operating income declined to $443 million from $585 million in the year-ago quarter with respective margins of 5.8% and 7.4%. EBITDA was down 4.5% to $1,607 million owing to decline in high margin wireline revenues for a margin of 21.1% compared with 21.3% in the year-earlier quarter.
Other Quarterly Details
Total operating expenses increased 23.2% year over year to $34,530 million, while operating income was down 91.7% to $600 million. Consolidated adjusted EBITDA declined to $11,678 million from $11,747 million for respective margins of 33.2% and 33.3%.
Cash Flow & Liquidity
Verizon generated $37,475 million of net cash from operating activities in 2023 compared with $37,141 million in the year-ago period. The improvement was primarily due to working capital improvements driven by lower inventory levels, fewer phone upgrades and a modest improvement in customer payment patterns. Free cash flow was $4,074 million for the quarter compared with $1,666 million in the prior-year period. As of Dec 31, 2023, the company had $2,065 million in cash and cash equivalents with $137,701 million of long-term debt compared with respective tallies of $2,605 million and $140,676 million in the year-ago period.
Guidance
For 2024, Verizon expects wireless service revenue growth in the range of 2%-3.5%. Adjusted EBITDA is likely to grow 1. The company expects adjusted earnings in the range of $4.50 to $4.70 per share. Capital expenditure is estimated to be within the range of $17 billion and $17.5 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Verizon has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Verizon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.