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Verizon (VZ) Down 6.2% Since Earnings Report: Can It Rebound?
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It has been more than a month since the last earnings report for Verizon Communications Inc. (VZ - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
Verizon Q3 Earnings In Line, Revenues Beat Estimates
Verizon reported mixed financial numbers in the third quarter of 2017. While the top line surpassed the Zacks Consensus Estimate, the bottom line met the mark.
Net Income
Quarterly-GAAP net income was $3,736 million compared with $3,747 million in the year-ago quarter. Adjusted earnings per share were 98 cents in the reported quarter, in line with the Zacks Consensus Estimate.
Revenue
Total revenue increased 2.5% year over year to $31,717 million beating the Zacks Consensus Estimate of $31,204 million.
Operating Metrics
Total operating expenses in the quarter under review were $24,509 million, up 0.5% year over year. Operating income totaled $7,208 million compared with $6,540 million in the year-ago quarter.
Cash Flow and Liquidity
As of Sep 30, 2017, Verizon generated $17.2 billion of cash from operating activities compared with $17.7 billion in the year-ago period.
At the end of the third quarter of 2017, Verizon had $4,487 million in cash and $115,317 million in long-term debts compared with $2,880 million and $105,433 million, respectively, at the end of 2016.
Wireless Segment
Total revenue was $21,580 million, down 2.4% year over year. Service revenues dropped 5.1% to $15,841 million. Equipment revenues increased 5.5% to $4,352 million. Other revenues totaled $1,387 million, up 7.3%.
Operating expenses decreased 3.3% to $13,977 million. Operating income declined 0.6% to $7,603 million. Quarterly operating income margin was 35.2% compared with 34.6% in the year-ago quarter. Segment EBITDA increased 0.4% to $9,969 million. EBITDA margin was 46.2% compared with 44.9% in the prior-year quarter.
As of Sep 30, 2017, Verizon had 115.274 million retail subscribers, up 1.4% year over year. Of the total, retail postpaid subscriber count was 109.686 million, up 1.4%. Meanwhile, retail prepaid user count was 5.588 million, up 2.4%. In the reported quarter, the company gained 0.603 million postpaid customers and 0.139 million prepaid customers.
Quarterly retail postpaid churn rate was 0.97% compared with 1.04% in the year-ago quarter. Total retail churn rate was 1.19% compared with 1.28% in the year-ago quarter. Of the total activated phones, smartphones accounted for 94.8% compared with 93.1% in the prior-year quarter. Retail postpaid ARPA (average revenue per account) was $136.31 compared with $144.94 in the year-ago quarter.
Wireline Segment
Total revenue at the segment was $7,662 million, up 1.1% year over year. Consumer retail revenues were up 0.9% to $3,204 million. Enterprise Solutions revenues contracted 0.5% to $2,262 million. Partner Solutions revenues up 2.1% to $1,244 million. Business Markets revenues grossed $903 million, up 8.3%. Other revenues decreased 35.5% to $49 million.
Operating expenses increased 1.3% to $7,597 million. Quarterly operating income was $65 million against an operating loss of $73 million in the year-ago quarter. Quarterly operating margin was 0.8% as opposed to an operating loss of 1.0% in the year-ago quarter. Segment EBITDA was up a whopping 4.8% to $1,614 million. EBITDA margin was 21.1% compared with 20.3% in the year-ago quarter.
As of Sep 30, FiOS video subscriber base was 4.648 million (down 0.5% year over year). FiOS Internet subscriber count was 5.803 million (up 3.9%) and FiOS digital voice residence connections totaled 3.920 million (up 1.0%). During the quarter, Verizon lost 18,000 FiOS video subscribers while gaining 11,000 FiOS digital voice residential connections and 66,000 FiOS internet subscribers.
High-speed internet connection dropped 19.1% year over year to 1.175 million while total broadband connection number was pegged at 6.978 million, down 0.9%. Primary residence switched access connections decreased 15.7% to 2.830 million and Primary residence connections fell 6.8% to 6.750 million. Total retail residence voice connections declined 7.1% to 6.950 million and total voice connections contracted 7.7% to 13.100 million.
Outlook for 2017
Management has estimated full-year 2017 revenues and earnings per share to be fairly consistent with 2016, with improvement in wireless service revenue and equipment revenue trends. Consolidated capital spending for 2017 will be in the range of $16.8 billion to $17.5 billion.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
VGM Scores
Currently, the stock has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. The stock was allocated a grade of A on the value side, putting it in the top 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.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Verizon (VZ) Down 6.2% Since Earnings Report: Can It Rebound?
It has been more than a month since the last earnings report for Verizon Communications Inc. (VZ - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
Verizon Q3 Earnings In Line, Revenues Beat Estimates
Verizon reported mixed financial numbers in the third quarter of 2017. While the top line surpassed the Zacks Consensus Estimate, the bottom line met the mark.
Net Income
Quarterly-GAAP net income was $3,736 million compared with $3,747 million in the year-ago quarter. Adjusted earnings per share were 98 cents in the reported quarter, in line with the Zacks Consensus Estimate.
Revenue
Total revenue increased 2.5% year over year to $31,717 million beating the Zacks Consensus Estimate of $31,204 million.
Operating Metrics
Total operating expenses in the quarter under review were $24,509 million, up 0.5% year over year. Operating income totaled $7,208 million compared with $6,540 million in the year-ago quarter.
Cash Flow and Liquidity
As of Sep 30, 2017, Verizon generated $17.2 billion of cash from operating activities compared with $17.7 billion in the year-ago period.
At the end of the third quarter of 2017, Verizon had $4,487 million in cash and $115,317 million in long-term debts compared with $2,880 million and $105,433 million, respectively, at the end of 2016.
Wireless Segment
Total revenue was $21,580 million, down 2.4% year over year. Service revenues dropped 5.1% to $15,841 million. Equipment revenues increased 5.5% to $4,352 million. Other revenues totaled $1,387 million, up 7.3%.
Operating expenses decreased 3.3% to $13,977 million. Operating income declined 0.6% to $7,603 million. Quarterly operating income margin was 35.2% compared with 34.6% in the year-ago quarter. Segment EBITDA increased 0.4% to $9,969 million. EBITDA margin was 46.2% compared with 44.9% in the prior-year quarter.
As of Sep 30, 2017, Verizon had 115.274 million retail subscribers, up 1.4% year over year. Of the total, retail postpaid subscriber count was 109.686 million, up 1.4%. Meanwhile, retail prepaid user count was 5.588 million, up 2.4%. In the reported quarter, the company gained 0.603 million postpaid customers and 0.139 million prepaid customers.
Quarterly retail postpaid churn rate was 0.97% compared with 1.04% in the year-ago quarter. Total retail churn rate was 1.19% compared with 1.28% in the year-ago quarter. Of the total activated phones, smartphones accounted for 94.8% compared with 93.1% in the prior-year quarter. Retail postpaid ARPA (average revenue per account) was $136.31 compared with $144.94 in the year-ago quarter.
Wireline Segment
Total revenue at the segment was $7,662 million, up 1.1% year over year. Consumer retail revenues were up 0.9% to $3,204 million. Enterprise Solutions revenues contracted 0.5% to $2,262 million. Partner Solutions revenues up 2.1% to $1,244 million. Business Markets revenues grossed $903 million, up 8.3%. Other revenues decreased 35.5% to $49 million.
Operating expenses increased 1.3% to $7,597 million. Quarterly operating income was $65 million against an operating loss of $73 million in the year-ago quarter. Quarterly operating margin was 0.8% as opposed to an operating loss of 1.0% in the year-ago quarter. Segment EBITDA was up a whopping 4.8% to $1,614 million. EBITDA margin was 21.1% compared with 20.3% in the year-ago quarter.
As of Sep 30, FiOS video subscriber base was 4.648 million (down 0.5% year over year). FiOS Internet subscriber count was 5.803 million (up 3.9%) and FiOS digital voice residence connections totaled 3.920 million (up 1.0%). During the quarter, Verizon lost 18,000 FiOS video subscribers while gaining 11,000 FiOS digital voice residential connections and 66,000 FiOS internet subscribers.
High-speed internet connection dropped 19.1% year over year to 1.175 million while total broadband connection number was pegged at 6.978 million, down 0.9%. Primary residence switched access connections decreased 15.7% to 2.830 million and Primary residence connections fell 6.8% to 6.750 million. Total retail residence voice connections declined 7.1% to 6.950 million and total voice connections contracted 7.7% to 13.100 million.
Outlook for 2017
Management has estimated full-year 2017 revenues and earnings per share to be fairly consistent with 2016, with improvement in wireless service revenue and equipment revenue trends. Consolidated capital spending for 2017 will be in the range of $16.8 billion to $17.5 billion.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
VGM Scores
Currently, the stock has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. The stock was allocated a grade of A on the value side, putting it in the top 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.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.