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Verizon (VZ) Posts Mixed Q4: Earnings Lags, Revenues Top
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Verizon Communications Inc. (VZ - Free Report) reported mixed financial numbers in the fourth quarter of 2016. While the top line surpassed the Zacks Consensus Estimate, the bottom line missed the same.
Quarterly GAAP net income was $4,600 million or $1.10 per share compared with $5,513 million or $1.32 per share in the year-ago quarter. Adjusted earnings per share came in at 86 cents in the reported quarter, below the Zacks Consensus Estimate of 89 cents.
Quarterly total revenue decreased 5.6% year over year to $32,340 million outpacing the Zacks Consensus Estimate which was pegged at $32,160 million.
Total operating expenses in the fourth quarter of 2016 were $24,317 million, down 0.8% year over year. Operating income came in at $8,023 million compared with $9,744 million in the year-ago quarter. Adjusted EBITDA was $10,421 million compared with $11,279 million in the prior-year quarter.
Cash Flow & Liquidity
In 2016, Verizon generated $22,715 million of cash from operating activities compared with $38,930 in 2015. Free cash flow in 2016 was $5,656 million compared with $21,155 million in 2015. At the end of 2016, Verizon had $2,880 million in cash and $108,078 million in long-term debt compared with $4,470 million and $103,240 million, respectively, at the end of 2015. The debt-to-capitalization ratio was 0.81 at the end of 2016 compared with 0.85 at the end of 2015.
Wireless Segment
Total revenue was $23,377 million, down 1.5% year over year. Service revenues dropped 4.9% to $16,346 million. Equipment revenues rose 6.2% to $5,733 million. Other revenues totaled $1,296 million, up 13.8%.
Operating expenses inched up 0.8% to $17.068 million. Operating income declined 7.2% to $6,309 million. Quarterly operating income margin was 27% in comparison with 28.6% in the year-ago comparable period. Segment EBITDA decreased 5.2% to $8,630 million. EBITDA margin was 36.9% compared with 38.4% in the prior-year quarter.
At the end of 2016, Verizon had 114.243 million retail subscribers, up 1.9% year over year. Out of the total, retail postpaid subscriber count was 108.796 million, up 2.1%; and retail prepaid user count was 5.447 million, down 2.4%. During the reported quarter, the company added 0.591 million postpaid customers (down 61.1% year over year) while prepaid customer count decreased by 0.009 million.
Quarterly retail postpaid churn rate was 1.10% compared with 0.96% in the year-ago quarter whereas total retail churn rate was 1.34% versus 1.23% in the year-ago quarter. Of the total activated phones, smartphones accounted for 95.2% compared with 93.7% in the prior-year quarter.
Wireline Segment
Total revenue at the segment was $7,812 million, down 3.1% year over year. Consumer retail revenues were up 0.2% to $3,232 million. Small business revenues grossed $410 million, down 3.3%. Global Enterprise revenues contracted 4.5% to $2,872 million. Global wholesale revenues dropped 7.5% to $1,225 million and Other revenues decreased 9.9% to $73 million.
Operating expenses decreased 8.2% to $7,398 million. Quarterly operating income was $414 million. Quarterly operating margin came in at 5.3% compared with 0.1% in the year-ago quarter. Segment EBITDA was down 17.7% to $1,879 million. EBITDA margin was 24.1% compared with 19.8% in the year-ago quarter.
At the end of 2016, FiOS video subscriber base was 4.694 million (up 1.3% year over year), FiOS Internet subscriber count was 5.653 million (up 4.3%) and FiOS digital voice residence connections totaled 3.895 million (up 0.6%). During the quarter, Verizon gained 21,000 FiOS video subscribers, 68,000 FiOS Internet customers and 13,000 FiOS digital voice residential connections.
High-speed Internet connection tally dropped 16.9% year over year to 1.385 million while total broadband connection number was pegged at 7.038 million. Primary residence switched access connections decreased 15% to 3.230 million and Primary residence connections fell 7.1% to 7.125 million. Total retail residence voice connections declined 7.5% to 7.355 million and total voice connections contracted 7.3% to 13.939 million.
Outlook for 2017
Management has estimated that 2017 revenues and earnings per share will be mostly in line with 2016. Consolidated capital spending for 2017 will be in the range of $16.8 billion to $17.5 billion.
Verizon Communications Inc. Price, Consensus and EPS Surprise
Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company is facing intense competitive pressure from rivals like AT&T Inc. (T - Free Report) , T-Mobile US Inc. (TMUS - Free Report) and Sprint Corp. (S - Free Report) . In order to counter this, the company has been focusing on generating revenues from video streaming services and digital advertising. Keeping with this strategy, it acquired AOL and Millennium Media.
In a bid to strengthen its presence in this space, Verizon has entered into an agreement to acquire Yahoo! Inc.’s core assets for $4.8 billion. If the company can effectively assimilate the strategic assets with that of AOL and Millennium Media, we believe it will gain an edge in the digital mobile content and advertising platform.
Zacks' Top 10 Stocks for 2017
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Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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Verizon (VZ) Posts Mixed Q4: Earnings Lags, Revenues Top
Verizon Communications Inc. (VZ - Free Report) reported mixed financial numbers in the fourth quarter of 2016. While the top line surpassed the Zacks Consensus Estimate, the bottom line missed the same.
Quarterly GAAP net income was $4,600 million or $1.10 per share compared with $5,513 million or $1.32 per share in the year-ago quarter. Adjusted earnings per share came in at 86 cents in the reported quarter, below the Zacks Consensus Estimate of 89 cents.
Quarterly total revenue decreased 5.6% year over year to $32,340 million outpacing the Zacks Consensus Estimate which was pegged at $32,160 million.
Total operating expenses in the fourth quarter of 2016 were $24,317 million, down 0.8% year over year. Operating income came in at $8,023 million compared with $9,744 million in the year-ago quarter. Adjusted EBITDA was $10,421 million compared with $11,279 million in the prior-year quarter.
Cash Flow & Liquidity
In 2016, Verizon generated $22,715 million of cash from operating activities compared with $38,930 in 2015. Free cash flow in 2016 was $5,656 million compared with $21,155 million in 2015. At the end of 2016, Verizon had $2,880 million in cash and $108,078 million in long-term debt compared with $4,470 million and $103,240 million, respectively, at the end of 2015. The debt-to-capitalization ratio was 0.81 at the end of 2016 compared with 0.85 at the end of 2015.
Wireless Segment
Total revenue was $23,377 million, down 1.5% year over year. Service revenues dropped 4.9% to $16,346 million. Equipment revenues rose 6.2% to $5,733 million. Other revenues totaled $1,296 million, up 13.8%.
Operating expenses inched up 0.8% to $17.068 million. Operating income declined 7.2% to $6,309 million. Quarterly operating income margin was 27% in comparison with 28.6% in the year-ago comparable period. Segment EBITDA decreased 5.2% to $8,630 million. EBITDA margin was 36.9% compared with 38.4% in the prior-year quarter.
At the end of 2016, Verizon had 114.243 million retail subscribers, up 1.9% year over year. Out of the total, retail postpaid subscriber count was 108.796 million, up 2.1%; and retail prepaid user count was 5.447 million, down 2.4%. During the reported quarter, the company added 0.591 million postpaid customers (down 61.1% year over year) while prepaid customer count decreased by 0.009 million.
Quarterly retail postpaid churn rate was 1.10% compared with 0.96% in the year-ago quarter whereas total retail churn rate was 1.34% versus 1.23% in the year-ago quarter. Of the total activated phones, smartphones accounted for 95.2% compared with 93.7% in the prior-year quarter.
Wireline Segment
Total revenue at the segment was $7,812 million, down 3.1% year over year. Consumer retail revenues were up 0.2% to $3,232 million. Small business revenues grossed $410 million, down 3.3%. Global Enterprise revenues contracted 4.5% to $2,872 million. Global wholesale revenues dropped 7.5% to $1,225 million and Other revenues decreased 9.9% to $73 million.
Operating expenses decreased 8.2% to $7,398 million. Quarterly operating income was $414 million. Quarterly operating margin came in at 5.3% compared with 0.1% in the year-ago quarter. Segment EBITDA was down 17.7% to $1,879 million. EBITDA margin was 24.1% compared with 19.8% in the year-ago quarter.
At the end of 2016, FiOS video subscriber base was 4.694 million (up 1.3% year over year), FiOS Internet subscriber count was 5.653 million (up 4.3%) and FiOS digital voice residence connections totaled 3.895 million (up 0.6%). During the quarter, Verizon gained 21,000 FiOS video subscribers, 68,000 FiOS Internet customers and 13,000 FiOS digital voice residential connections.
High-speed Internet connection tally dropped 16.9% year over year to 1.385 million while total broadband connection number was pegged at 7.038 million. Primary residence switched access connections decreased 15% to 3.230 million and Primary residence connections fell 7.1% to 7.125 million. Total retail residence voice connections declined 7.5% to 7.355 million and total voice connections contracted 7.3% to 13.939 million.
Outlook for 2017
Management has estimated that 2017 revenues and earnings per share will be mostly in line with 2016. Consolidated capital spending for 2017 will be in the range of $16.8 billion to $17.5 billion.
Verizon Communications Inc. Price, Consensus and EPS Surprise
Verizon Communications Inc. Price, Consensus and EPS Surprise | Verizon Communications Inc. Quote
Recent Developments
Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company is facing intense competitive pressure from rivals like AT&T Inc. (T - Free Report) , T-Mobile US Inc. (TMUS - Free Report) and Sprint Corp. (S - Free Report) . In order to counter this, the company has been focusing on generating revenues from video streaming services and digital advertising. Keeping with this strategy, it acquired AOL and Millennium Media.
In a bid to strengthen its presence in this space, Verizon has entered into an agreement to acquire Yahoo! Inc.’s core assets for $4.8 billion. If the company can effectively assimilate the strategic assets with that of AOL and Millennium Media, we believe it will gain an edge in the digital mobile content and advertising platform.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>