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Should Verizon (VZ) Stock Be in Your Portfolio Post Q2 Earnings?
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Verizon Communications Inc. (VZ - Free Report) recorded relatively healthy second-quarter results with the bottom line beating the Zacks Consensus Estimate but the top line missing the same.
The company recorded consolidated postpaid net additions of 340,000 in the quarter, along with retail postpaid phone net additions of 148,000. Total broadband net additions for the quarter were 391,000, including 378,000 fixed wireless net additions.
Key Growth Drivers
Verizon is offering various mix-and-match pricing in both wireless and home broadband plans, which has led to solid customer additions. The company has witnessed increased adoption of 5G devices and premium unlimited plans. Moreover, in the enterprise and wholesale business, Verizon is changing its revenue mix toward newer growth services like cloud, security and professional services.
In addition, Verizon is witnessing significant 5G adoption and fixed wireless broadband momentum. The telecom giant plans to accelerate the availability of its 5G Ultra Wideband network across the country. The company’s growth strategy includes 5G mobility, nationwide broadband and mobile edge compute and business solutions.
Verizon is building the entire network infrastructure and ecosystem to provide the most amazing 5G experience to customers. It continues to deploy Home Internet service in select cities, where users can experience a maximum download speed of up to 1 Gbps. It is also expanding 5G Business Internet service that offers an alternative to cable broadband. Verizon offers the best of LTE and 5G Ultra Wideband facilities with the launch of On Site 5G — a transformative on-premises, private 5G network — for business enterprises.
Verizon’s 5G mobility service offers an unmatched experience that impacts industries as diverse as public safety, health care, retail and sports. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These include massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.
Fiber Densification
With one of the most efficient wireless networks in the United States, Verizon continues to deploy the latest 4G LTE Advanced technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investment. Verizon has been aggressively forging ahead to expand its fiber optics networks to support 4G LTE and 5G wireless standards as well as wireline connections. The company remains focused on making necessary capital expenditures due to the continued expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to cater to huge traffic demands across multiple verticals and the continued deployment of the fiber infrastructure.
Margin Woes Persist
In a bid to expand its customer base, Verizon is spending heavily on promotion and is also offering lucrative discounts, which are weighing on margins. The company’s wireline division is struggling with persistent losses in access lines owing to competitive pressure from the voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data and video) offerings by cable companies. These are weighing on the company’s revenues. The company also recorded high capital expenditures to support the launch and continued build-out of its 5G Ultra Wideband network, deployment of significant fiber assets across the country and upgrade to Intelligent Edge Network architecture.
Verizon has splurged in the C-Band auction that is offering airwaves in the 3.7 gigahertz-to-4.2 gigahertz area of spectrum to acquire key mid-band spectrum for potential 5G deployments in the next few years. Unless the high auctioning expenses are justified, margins are likely to be compromised significantly.
Image Source: Zacks Investment Research
Decline in Legacy Services
In the second quarter of 2024, Verizon registered 65,000 Fios Video net losses, reflecting the ongoing shift from traditional linear video to over-the-top offerings. Verizon operates in a competitive and almost saturated U.S. wireless market with incumbents like AT&T Inc. (T - Free Report) and T-Mobile US Inc. (TMUS - Free Report) . The stock has gained 17.5% over the past year compared with the industry’s growth of 24.8%, lagging its peers.
Spectrum crunch has become a major issue in the U.S. telecom industry. Most carriers are finding it increasingly difficult to manage mobile data traffic, which is growing by leaps and bounds. The situation has become even more acute with the growing popularity of iPhone and Android smartphones as well as rising online mobile video streaming, cloud computing and video conferencing services.
Image Source: Zacks Investment Research
Estimate Revision Trend
Earnings estimates for Verizon for 2024 have moved down 0.2% to $4.58 over the past 60 days, while the same for 2025 has declined 1.06% to $4.67. The negative estimate revision depicts bearish sentiments for the stock.
Image Source: Zacks Investment Research
End Note
By investing steadily in infrastructure and pioneering new technologies, Verizon is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid subscriber growth, higher average revenue per user and increased broadband and fiber penetration.
However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. With a Zacks Rank #3 (Hold), Verizon appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Should Verizon (VZ) Stock Be in Your Portfolio Post Q2 Earnings?
Verizon Communications Inc. (VZ - Free Report) recorded relatively healthy second-quarter results with the bottom line beating the Zacks Consensus Estimate but the top line missing the same.
The company recorded consolidated postpaid net additions of 340,000 in the quarter, along with retail postpaid phone net additions of 148,000. Total broadband net additions for the quarter were 391,000, including 378,000 fixed wireless net additions.
Key Growth Drivers
Verizon is offering various mix-and-match pricing in both wireless and home broadband plans, which has led to solid customer additions. The company has witnessed increased adoption of 5G devices and premium unlimited plans. Moreover, in the enterprise and wholesale business, Verizon is changing its revenue mix toward newer growth services like cloud, security and professional services.
In addition, Verizon is witnessing significant 5G adoption and fixed wireless broadband momentum. The telecom giant plans to accelerate the availability of its 5G Ultra Wideband network across the country. The company’s growth strategy includes 5G mobility, nationwide broadband and mobile edge compute and business solutions.
Verizon is building the entire network infrastructure and ecosystem to provide the most amazing 5G experience to customers. It continues to deploy Home Internet service in select cities, where users can experience a maximum download speed of up to 1 Gbps. It is also expanding 5G Business Internet service that offers an alternative to cable broadband. Verizon offers the best of LTE and 5G Ultra Wideband facilities with the launch of On Site 5G — a transformative on-premises, private 5G network — for business enterprises.
Verizon’s 5G mobility service offers an unmatched experience that impacts industries as diverse as public safety, health care, retail and sports. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These include massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.
Fiber Densification
With one of the most efficient wireless networks in the United States, Verizon continues to deploy the latest 4G LTE Advanced technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investment. Verizon has been aggressively forging ahead to expand its fiber optics networks to support 4G LTE and 5G wireless standards as well as wireline connections. The company remains focused on making necessary capital expenditures due to the continued expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to cater to huge traffic demands across multiple verticals and the continued deployment of the fiber infrastructure.
Margin Woes Persist
In a bid to expand its customer base, Verizon is spending heavily on promotion and is also offering lucrative discounts, which are weighing on margins. The company’s wireline division is struggling with persistent losses in access lines owing to competitive pressure from the voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data and video) offerings by cable companies. These are weighing on the company’s revenues. The company also recorded high capital expenditures to support the launch and continued build-out of its 5G Ultra Wideband network, deployment of significant fiber assets across the country and upgrade to Intelligent Edge Network architecture.
Verizon has splurged in the C-Band auction that is offering airwaves in the 3.7 gigahertz-to-4.2 gigahertz area of spectrum to acquire key mid-band spectrum for potential 5G deployments in the next few years. Unless the high auctioning expenses are justified, margins are likely to be compromised significantly.
Image Source: Zacks Investment Research
Decline in Legacy Services
In the second quarter of 2024, Verizon registered 65,000 Fios Video net losses, reflecting the ongoing shift from traditional linear video to over-the-top offerings. Verizon operates in a competitive and almost saturated U.S. wireless market with incumbents like AT&T Inc. (T - Free Report) and T-Mobile US Inc. (TMUS - Free Report) . The stock has gained 17.5% over the past year compared with the industry’s growth of 24.8%, lagging its peers.
Spectrum crunch has become a major issue in the U.S. telecom industry. Most carriers are finding it increasingly difficult to manage mobile data traffic, which is growing by leaps and bounds. The situation has become even more acute with the growing popularity of iPhone and Android smartphones as well as rising online mobile video streaming, cloud computing and video conferencing services.
Image Source: Zacks Investment Research
Estimate Revision Trend
Earnings estimates for Verizon for 2024 have moved down 0.2% to $4.58 over the past 60 days, while the same for 2025 has declined 1.06% to $4.67. The negative estimate revision depicts bearish sentiments for the stock.
Image Source: Zacks Investment Research
End Note
By investing steadily in infrastructure and pioneering new technologies, Verizon is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid subscriber growth, higher average revenue per user and increased broadband and fiber penetration.
However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. With a Zacks Rank #3 (Hold), Verizon appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.