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Verizon Communications (VZ) Q4 Earnings: What's in Store?
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Verizon Communications Inc. (VZ - Free Report) is scheduled to release fourth-quarter 2017 results, before the opening bell on Jan 23.
The company’s bottom line met the Zacks Consensus Estimate in two of the previous four quarters. However, earnings lagged the Zacks Consensus Estimate in the remaining two quarters, with an average miss of 1.61%.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
Verizon operates in a highly competitive U.S. telecom market with incumbents like AT&T Inc. (T - Free Report) , T-Mobile US Inc. (TMUS - Free Report) and Sprint Corp. (S - Free Report) . Stiff competition has resulted in cut-throat pricing pressure in the wireless space.
Verizon offers the most efficient wireless network in the United States. It has a strong portfolio of wireless spectrums of which a little more than half is currently used to support 4G LTE networks. The telecom behemoth is continuously investing in its wireless and wireline fiber-optic networks.
In third-quarter 2017, Verizon 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.
Accumulation of dark fiber will bolster Verizon’s cell network density consequently giving a boost to its mobile backhaul network. Adoption of small cells has increased due to the inconvenience of installing large towers in inaccessible areas. Small cells will be used to augment its existing 4G LTE and upcoming 5G network and will primarily concentrate on high traffic locations like a business district or a shopping mall.
Verizon is systematically diversifying itself as a major player in the digital content and online advertising space. The company has formed a new division called Oath to oversee assets of Yahoo and AOL, including more than 20 brands like Yahoo News, HuffPost, Engadget, TechCrunch, Yahoo Finance, Yahoo Sports and Tumblr.
Buoyed by such tailwinds, Verizon’s shares have gained 7.40%, surpassing the industry’s growth of 2.60% over the past three months.
On the other hand, the U.S. telecom market continues to witness intense pricing competition, as success to a great extent depends on technical superiority, quality of services and scalability. Moreover, the U.S. wireless industry has become more competitive with the entry of cable MSOs (multi service operators) in this space. In order to stay abreast of competition, Verizon needs to be constantly on its toes and introduce innovative products to gain from the industry’s growing momentum.
The company’s wireline division is struggling with persistent losses in access lines owing to competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by cable TV operators. These are weighing on the company’s revenues and margins.
Verizon has predicted that its earnings may be flat on a year-over-year basis in 2017 as it does not see enough variables for growth in the year. Initially, Verizon hopes to see higher growth in the coming year. Management expects 2017 revenues and earnings per share to be almost in line with 2016 levels. Consolidated capital spending for 2017 is estimated in the range of $16.8 - $17.5 billion.
Also, in an effort to expand its customer base, Verizon is spending heavily on promotion and is also offering lucrative discounts. These strategies are likely to impact the company’s wireless segment EBITDA and EBITDA service margins in the coming quarters.
Earnings Whispers
Our proven model does not conclusively show that Verizon is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Verizon has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 88 cents. You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.
Zacks Rank: Verizon has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 (Sell) or #5 going into the earnings announcement, especially when the company has not witnessed any estimate revisions.
Key Pick
T-Mobile US Inc. has the right combination of elements to post an earnings beat when it expectedly posts fourth-quarter 2017 results on Feb 13. T-Mobile US has an Earnings ESP of +1.43% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, resulting in an average beat of a whopping 53.97%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Verizon Communications (VZ) Q4 Earnings: What's in Store?
Verizon Communications Inc. (VZ - Free Report) is scheduled to release fourth-quarter 2017 results, before the opening bell on Jan 23.
The company’s bottom line met the Zacks Consensus Estimate in two of the previous four quarters. However, earnings lagged the Zacks Consensus Estimate in the remaining two quarters, with an average miss of 1.61%.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
Verizon operates in a highly competitive U.S. telecom market with incumbents like AT&T Inc. (T - Free Report) , T-Mobile US Inc. (TMUS - Free Report) and Sprint Corp. (S - Free Report) . Stiff competition has resulted in cut-throat pricing pressure in the wireless space.
Verizon offers the most efficient wireless network in the United States. It has a strong portfolio of wireless spectrums of which a little more than half is currently used to support 4G LTE networks. The telecom behemoth is continuously investing in its wireless and wireline fiber-optic networks.
In third-quarter 2017, Verizon 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.
Accumulation of dark fiber will bolster Verizon’s cell network density consequently giving a boost to its mobile backhaul network. Adoption of small cells has increased due to the inconvenience of installing large towers in inaccessible areas. Small cells will be used to augment its existing 4G LTE and upcoming 5G network and will primarily concentrate on high traffic locations like a business district or a shopping mall.
Verizon is systematically diversifying itself as a major player in the digital content and online advertising space. The company has formed a new division called Oath to oversee assets of Yahoo and AOL, including more than 20 brands like Yahoo News, HuffPost, Engadget, TechCrunch, Yahoo Finance, Yahoo Sports and Tumblr.
Buoyed by such tailwinds, Verizon’s shares have gained 7.40%, surpassing the industry’s growth of 2.60% over the past three months.
On the other hand, the U.S. telecom market continues to witness intense pricing competition, as success to a great extent depends on technical superiority, quality of services and scalability. Moreover, the U.S. wireless industry has become more competitive with the entry of cable MSOs (multi service operators) in this space. In order to stay abreast of competition, Verizon needs to be constantly on its toes and introduce innovative products to gain from the industry’s growing momentum.
The company’s wireline division is struggling with persistent losses in access lines owing to competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by cable TV operators. These are weighing on the company’s revenues and margins.
Verizon has predicted that its earnings may be flat on a year-over-year basis in 2017 as it does not see enough variables for growth in the year. Initially, Verizon hopes to see higher growth in the coming year. Management expects 2017 revenues and earnings per share to be almost in line with 2016 levels. Consolidated capital spending for 2017 is estimated in the range of $16.8 - $17.5 billion.
Also, in an effort to expand its customer base, Verizon is spending heavily on promotion and is also offering lucrative discounts. These strategies are likely to impact the company’s wireless segment EBITDA and EBITDA service margins in the coming quarters.
Earnings Whispers
Our proven model does not conclusively show that Verizon is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Verizon has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 88 cents. You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.
Zacks Rank: Verizon has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 (Sell) or #5 going into the earnings announcement, especially when the company has not witnessed any estimate revisions.
Key Pick
T-Mobile US Inc. has the right combination of elements to post an earnings beat when it expectedly posts fourth-quarter 2017 results on Feb 13. T-Mobile US has an Earnings ESP of +1.43% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, resulting in an average beat of a whopping 53.97%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>