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Will Verizon's Restructuring Initiatives Impact Stock Performance?
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Verizon Communication, Inc. (VZ - Free Report) recently disclosed that it is set to incur a severance charge between $1.7 billion and $1.9 billion in the third quarter of 2024. In a bid to trim operating costs, the telecom giant announced a voluntary separation program in June for management staff based in the United States. Per the program, about 4,800 employees are expected to depart by the end of March, 2025 and over half of these workers are set to leave by the end of September 2024. The company is also planning to discontinue non-core businesses and stop using certain real estate assets. This will likely result in additional charges of around $230 million to $380 million.
Verizon’s Strategy to Cope With Fierce Competition
Verizon’s action to drive cost optimization and restructuring showcases broader industry-wide trends where major players are increasingly focusing on streamlining operations by reducing costs and improving profitability to navigate in a highly competitive market. In recent quarters, T-Mobile has also undertaken various cost discipline measures to boost profitability.
Verizon missed revenue estimates in the second quarter of fiscal 2024 owing to fewer smartphone upgrades. The company finds itself in a tough spot as competition with AT&T and T-Mobile intensifies. It is worth noting that both AT&T and T-Mobile are witnessing subscriber growth driven by the growing popularity of unlimited plans. Verizon's restructuring actions and focus on core services are part of its strategy to stay in the game.
Moreover, the company is also set to acquire fiber-optic internet provider Frontier Communications for $20 billion. Following the closure of the deal, Verizon will gain 2.2 million Frontier fiber customers in addition to its existing 7.4 million client base. The combined entity will have 25 million fiber passings. The buyout will better equip Verizon to combat the mourning competitive pressure from industry rivals.
Will This Affect VZ’s Share Price Movement?
The voluntary separation programs and restructuring of core businesses are expected to boost operational efficiency and profitability in the long run. However, a quarterly severance charge of upto $1.9 billion will put significant pressure on the company’s financials in the near term. The Frontier buyout will enhance Verizon’s competitive edge in the saturated U.S. wireless market. However, the fierce rivalry and financial impact of this restructuring on short-term profitability remain a concern for investors.
VZ’s Stock Price Movement
The stock has gained 28.8% in the past year compared with the industry’s growth of 36.4%.
In the last reported quarter, it delivered an earnings surprise of 8.25%. It is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Ubiquiti Inc. (UI - Free Report) sports a Zacks Rank #1 at present. The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises.
Its excellent global business model, which is flexible and adaptable to evolving changes in markets, helps it to beat challenges and maximize growth. The company’s effective management of its strong global network of more than 100 distributors and master resellers improved its UI’s visibility for future demand and inventory management techniques.
Workday Inc. (WDAY - Free Report) carries a Zacks Rank of 2 at present. In the last reported quarter, it delivered an earnings surprise of 7.36%.
WDAY is a leading provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes the process easier for organizations to provide analytical insights and decision support.
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Will Verizon's Restructuring Initiatives Impact Stock Performance?
Verizon Communication, Inc. (VZ - Free Report) recently disclosed that it is set to incur a severance charge between $1.7 billion and $1.9 billion in the third quarter of 2024. In a bid to trim operating costs, the telecom giant announced a voluntary separation program in June for management staff based in the United States. Per the program, about 4,800 employees are expected to depart by the end of March, 2025 and over half of these workers are set to leave by the end of September 2024. The company is also planning to discontinue non-core businesses and stop using certain real estate assets. This will likely result in additional charges of around $230 million to $380 million.
Verizon’s Strategy to Cope With Fierce Competition
Verizon’s action to drive cost optimization and restructuring showcases broader industry-wide trends where major players are increasingly focusing on streamlining operations by reducing costs and improving profitability to navigate in a highly competitive market. In recent quarters, T-Mobile has also undertaken various cost discipline measures to boost profitability.
Verizon missed revenue estimates in the second quarter of fiscal 2024 owing to fewer smartphone upgrades. The company finds itself in a tough spot as competition with AT&T and T-Mobile intensifies. It is worth noting that both AT&T and T-Mobile are witnessing subscriber growth driven by the growing popularity of unlimited plans. Verizon's restructuring actions and focus on core services are part of its strategy to stay in the game.
Moreover, the company is also set to acquire fiber-optic internet provider Frontier Communications for $20 billion. Following the closure of the deal, Verizon will gain 2.2 million Frontier fiber customers in addition to its existing 7.4 million client base. The combined entity will have 25 million fiber passings. The buyout will better equip Verizon to combat the mourning competitive pressure from industry rivals.
Will This Affect VZ’s Share Price Movement?
The voluntary separation programs and restructuring of core businesses are expected to boost operational efficiency and profitability in the long run. However, a quarterly severance charge of upto $1.9 billion will put significant pressure on the company’s financials in the near term. The Frontier buyout will enhance Verizon’s competitive edge in the saturated U.S. wireless market. However, the fierce rivalry and financial impact of this restructuring on short-term profitability remain a concern for investors.
VZ’s Stock Price Movement
The stock has gained 28.8% in the past year compared with the industry’s growth of 36.4%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Verizon currently carries a Zacks Rank #3 (Hold).
Arista Networks, Inc. (ANET - Free Report) carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the last reported quarter, it delivered an earnings surprise of 8.25%. It is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Ubiquiti Inc. (UI - Free Report) sports a Zacks Rank #1 at present. The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises.
Its excellent global business model, which is flexible and adaptable to evolving changes in markets, helps it to beat challenges and maximize growth. The company’s effective management of its strong global network of more than 100 distributors and master resellers improved its UI’s visibility for future demand and inventory management techniques.
Workday Inc. (WDAY - Free Report) carries a Zacks Rank of 2 at present. In the last reported quarter, it delivered an earnings surprise of 7.36%.
WDAY is a leading provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes the process easier for organizations to provide analytical insights and decision support.