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Verizon (VZ) Up 5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Verizon Communications (VZ - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Verizon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Verizon Beats Q2 Earnings Estimates, Falters on Revenues
Verizon 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.
Net Income
On a GAAP basis, net income in the quarter was $4,702 million or $1.09 per share compared with $4,766 million or $1.10 per share in the prior-year quarter. The year-over-year decrease was primarily attributable to higher interest expenses. Excluding non-recurring items, quarterly adjusted earnings were $1.15 per share compared with $1.21 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
Revenues
Quarterly total operating revenues increased to $32,796 million from $32,596 million in the prior year owing to pricing actions, partially offset by lower wireless equipment revenues driven by a challenging macroeconomic environment and lower postpaid phone upgrades. The top line missed the consensus estimate of $33,045 million.
Quarterly Segment Results
Consumer: Total revenues from this segment improved 1.5% year over year to $24,927 million, as higher service revenues were partially offset by lower equipment revenues in the quarter. However, it missed our revenue estimate of $24,952 million for the segment.
Service revenues were up 3% to $19,208 million, while wireless equipment revenues declined 6.5% to $4,143 million. Other revenues totaled $1,576 million, up 6% year over year.
The segment recorded 8,000 wireless retail postpaid phone net losses and 624,000 wireless retail prepaid net losses in the quarter. Wireless retail postpaid churn was 1%, while retail postpaid phone churn was 0.79%. The company recorded 24,000 Fios Internet net additions as high demand for reliable fiber optic broadband was spurred by higher video consumption. Fixed wireless broadband net additions were 218,000 for the quarter. However, Verizon registered 65,000 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 increased 3.7% to $7,604 million with a margin of 30.5%. EBITDA increased 4% to $10,998 million with a margin of 44.1% compared with 43.1% in the prior-year quarter due to lower costs of wireless equipment.
Business: The segment revenues were down 2.4% to $7,300 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 $7,493 million largely due to challenging macroeconomic conditions.
The segment had 268,000 wireless retail postpaid net additions in the quarter, including 156,000 postpaid phone net additions. Wireless retail postpaid churn was 1.45%, while retail postpaid phone churn was 1.1%. Fixed wireless broadband net additions were 160,000 for the quarter. Operating income declined to $500 million from $533 million in the year-ago quarter with respective margins of 6.8% and 7.1%. EBITDA was down 3.5% to $1,578 million owing to a decline in high-margin wireline revenues for a margin of 21.6% compared with 21.9% in the year-earlier quarter.
Other Quarterly Details
Total operating expenses decreased 1.6% year over year to $24,978 million, while operating income was up 8.3% to $7,818 million. Consolidated adjusted EBITDA increased to $12,301 million from $11,971 million led by wireless service revenue growth and perceived benefits from lower upgrade volumes for respective margins of 37.5% and 36.7%.
Cash Flow & Liquidity
Verizon generated $16,569 million of net cash from operating activities in the first six months of 2024 compared with $18,020 million in the year-ago period. The decline was primarily due to higher working capital requirements owing to higher interests and higher taxes. Free cash flow was $5,790 million for the quarter compared with $5,619 million in the prior-year period. As of Jun 30, 2024, the company had $2,432 million in cash and cash equivalents with $126,022 million of long-term debt.
Guidance Reiterated
For 2024, Verizon reiterated its earlier guidance and 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
At this time, 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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Verizon (VZ) Up 5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Verizon Communications (VZ - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Verizon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Verizon Beats Q2 Earnings Estimates, Falters on Revenues
Verizon 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.
Net Income
On a GAAP basis, net income in the quarter was $4,702 million or $1.09 per share compared with $4,766 million or $1.10 per share in the prior-year quarter. The year-over-year decrease was primarily attributable to higher interest expenses. Excluding non-recurring items, quarterly adjusted earnings were $1.15 per share compared with $1.21 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
Revenues
Quarterly total operating revenues increased to $32,796 million from $32,596 million in the prior year owing to pricing actions, partially offset by lower wireless equipment revenues driven by a challenging macroeconomic environment and lower postpaid phone upgrades. The top line missed the consensus estimate of $33,045 million.
Quarterly Segment Results
Consumer: Total revenues from this segment improved 1.5% year over year to $24,927 million, as higher service revenues were partially offset by lower equipment revenues in the quarter. However, it missed our revenue estimate of $24,952 million for the segment.
Service revenues were up 3% to $19,208 million, while wireless equipment revenues declined 6.5% to $4,143 million. Other revenues totaled $1,576 million, up 6% year over year.
The segment recorded 8,000 wireless retail postpaid phone net losses and 624,000 wireless retail prepaid net losses in the quarter. Wireless retail postpaid churn was 1%, while retail postpaid phone churn was 0.79%. The company recorded 24,000 Fios Internet net additions as high demand for reliable fiber optic broadband was spurred by higher video consumption. Fixed wireless broadband net additions were 218,000 for the quarter. However, Verizon registered 65,000 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 increased 3.7% to $7,604 million with a margin of 30.5%. EBITDA increased 4% to $10,998 million with a margin of 44.1% compared with 43.1% in the prior-year quarter due to lower costs of wireless equipment.
Business: The segment revenues were down 2.4% to $7,300 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 $7,493 million largely due to challenging macroeconomic conditions.
The segment had 268,000 wireless retail postpaid net additions in the quarter, including 156,000 postpaid phone net additions. Wireless retail postpaid churn was 1.45%, while retail postpaid phone churn was 1.1%. Fixed wireless broadband net additions were 160,000 for the quarter. Operating income declined to $500 million from $533 million in the year-ago quarter with respective margins of 6.8% and 7.1%. EBITDA was down 3.5% to $1,578 million owing to a decline in high-margin wireline revenues for a margin of 21.6% compared with 21.9% in the year-earlier quarter.
Other Quarterly Details
Total operating expenses decreased 1.6% year over year to $24,978 million, while operating income was up 8.3% to $7,818 million. Consolidated adjusted EBITDA increased to $12,301 million from $11,971 million led by wireless service revenue growth and perceived benefits from lower upgrade volumes for respective margins of 37.5% and 36.7%.
Cash Flow & Liquidity
Verizon generated $16,569 million of net cash from operating activities in the first six months of 2024 compared with $18,020 million in the year-ago period. The decline was primarily due to higher working capital requirements owing to higher interests and higher taxes. Free cash flow was $5,790 million for the quarter compared with $5,619 million in the prior-year period. As of Jun 30, 2024, the company had $2,432 million in cash and cash equivalents with $126,022 million of long-term debt.
Guidance Reiterated
For 2024, Verizon reiterated its earlier guidance and 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
At this time, 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.