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Verizon (VZ) Beats on Q4 Earnings, Misses Revenue Estimates
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Verizon Communications Inc. (VZ - Free Report) continued its solid performance in fourth-quarter 2018, primarily led by the wireless business. The company recorded modest top-line growth led by service revenues and remains well poised to benefit from the impending 5G boom.
Quarter Details
GAAP earnings for the reported quarter were $2,065 million or 47 cents per share compared with $18,783 million or $4.57 per share in the year-ago quarter. The sharp year-over-year decrease in GAAP earnings was primarily attributable to goodwill impairment charges related to Oath, acquisition and integration charges and severance and annual mark-to-market for pension and OPEB (other post-employment benefits) expenses. Excluding non-recurring items, adjusted earnings were $1.12 per share compared with 86 cents in the year-earlier quarter and beat the Zacks Consensus Estimate of $1.09.
Verizon Communications Inc. Price, Consensus and EPS Surprise
Consolidated GAAP revenues increased 1% year over year to $34,281 million and missed the Zacks Consensus Estimate of $34,321 million. Operating income declined 88.3% year over year to $637 million due to goodwill impairment charges related to Oath.
For full year 2018, Verizon reported GAAP earnings of $16,039 million or $3.76 per share compared with $30,550 million or $7.37 per share in the previous year. Total operating revenues for 2018 improved 3.8% year over year to $130,863 million.
Segment Performance: Wireless
Total revenues from this segment were $24,412 million, up 2.7% year over year. Service revenues remained almost flat at $15,898 million due to the effects of accounting changes for revenue recognition. Equipment revenues increased 5.3% to $6,821 million as the company focused on high-end devices, while Other revenues totaled $1,693 million, up 19.6% year over year.
Operating income improved 12.2% to $7,986 million due to higher retail postpaid connections. Quarterly operating income margin was 32.7% compared with 29.9% in the year-ago quarter. Segment EBITDA increased 9.7% to $10,381 million, resulting in EBITDA margin of 42.5% compared with respective tallies of $9,462 million and 39.8% in the prior-year quarter.
Verizon reported 1.2 million retail postpaid net additions in fourth-quarter 2018. Quarterly retail postpaid churn rate marginally increased to 1.08% from 1% in the year-ago quarter. Retail postpaid ARPA (average revenue per account) was $135.11 compared with $135.78 in the year-ago quarter.
Wireline Segment
Total revenues in the segment were $7,373 million, down 3.2% year over year owing to lower Business Markets revenues (down 5.5% to $836 million) and Enterprise Solutions (down 3% to $2,217 million). Partner Solutions revenues also decreased 9.2% to $1,098 million, while Consumer retail revenues declined 0.6% to $3,169 million. Other revenues were up 6% to $53 million.
Although Verizon added a net of 54,000 Fios Internet connections due to strong demand for value broadband connections, it lost 46,000 Fios Video connections amid pressures from cord-cutting of video bundles.
Quarterly operating loss was $273 million, against operating income of $62 million in the year-ago quarter. Segment EBITDA fell 18.6% to $1,298 million for EBITDA margin of 17.6% compared with 20.9% in the year-ago quarter.
Cash Flow and Liquidity
Verizon generated $34,339 million of cash from operating activities in 2018 compared with $24,318 million in the year-ago period. The year-over-year increase was driven by strong operating results, tax reform benefits, reduced impacts from the wireless device payment plan model, and lower discretionary pension and benefit contributions. At year-end 2018, Verizon had $2,745 million of cash and cash equivalents and $105,873 million in long-term debts compared with respective tallies of $2,079 million and $113,642 million. The company was able to reduce its total debt burden by $4.7 billion during 2018 due to strong cash flow and tax reform benefits.
Verizon contributed $2.3 billion to employee benefit program and remains on track to achieve cumulative cost savings of $10 billion by 2021. The company expects to achieve this goal through zero-based budgeting and the recently announced Voluntary Separation Program.
Outlook
For full-year 2019, Verizon expects GAAP revenues to increase by low single-digit percentage rates driven by expected savings from tax reform and higher cash flow from operations. Adjusted earnings per share are likely to remain flat. Capital expenditures for 2019 are likely to be in the range of $17 billion to $18 billion.
Moving Forward
With one of the most efficient wireless networks in the United States, Verizon continues to deploy the latest 4G LTE Advanced technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investment. During the quarter, Verizon launched the world’s first commercial 5G broadband Internet service in select markets. Dubbed Verizon 5G Home, the service was initially made available in select regions in Houston, Indianapolis, Los Angeles and Sacramento. The company expects to continue this healthy growth momentum in 5G with upcoming smartphone models and wider coverage across the country.
United States Cellular Corporation delivered average positive earnings surprise of 340.4% in the trailing four quarters, beating estimates in each.
ATN International has delivered average positive earnings surprise of 146.1% in the trailing four quarters, beating estimates thrice.
Sprint has a long-term earnings growth expectation of 19.6%. It delivered average positive earnings surprise of 320.8% in the trailing four quarters, beating estimates on each occasion.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Verizon (VZ) Beats on Q4 Earnings, Misses Revenue Estimates
Verizon Communications Inc. (VZ - Free Report) continued its solid performance in fourth-quarter 2018, primarily led by the wireless business. The company recorded modest top-line growth led by service revenues and remains well poised to benefit from the impending 5G boom.
Quarter Details
GAAP earnings for the reported quarter were $2,065 million or 47 cents per share compared with $18,783 million or $4.57 per share in the year-ago quarter. The sharp year-over-year decrease in GAAP earnings was primarily attributable to goodwill impairment charges related to Oath, acquisition and integration charges and severance and annual mark-to-market for pension and OPEB (other post-employment benefits) expenses. Excluding non-recurring items, adjusted earnings were $1.12 per share compared with 86 cents in the year-earlier quarter and beat the Zacks Consensus Estimate of $1.09.
Verizon Communications Inc. Price, Consensus and EPS Surprise
Verizon Communications Inc. Price, Consensus and EPS Surprise | Verizon Communications Inc. Quote
Consolidated GAAP revenues increased 1% year over year to $34,281 million and missed the Zacks Consensus Estimate of $34,321 million. Operating income declined 88.3% year over year to $637 million due to goodwill impairment charges related to Oath.
For full year 2018, Verizon reported GAAP earnings of $16,039 million or $3.76 per share compared with $30,550 million or $7.37 per share in the previous year. Total operating revenues for 2018 improved 3.8% year over year to $130,863 million.
Segment Performance: Wireless
Total revenues from this segment were $24,412 million, up 2.7% year over year. Service revenues remained almost flat at $15,898 million due to the effects of accounting changes for revenue recognition. Equipment revenues increased 5.3% to $6,821 million as the company focused on high-end devices, while Other revenues totaled $1,693 million, up 19.6% year over year.
Operating income improved 12.2% to $7,986 million due to higher retail postpaid connections. Quarterly operating income margin was 32.7% compared with 29.9% in the year-ago quarter. Segment EBITDA increased 9.7% to $10,381 million, resulting in EBITDA margin of 42.5% compared with respective tallies of $9,462 million and 39.8% in the prior-year quarter.
Verizon reported 1.2 million retail postpaid net additions in fourth-quarter 2018. Quarterly retail postpaid churn rate marginally increased to 1.08% from 1% in the year-ago quarter. Retail postpaid ARPA (average revenue per account) was $135.11 compared with $135.78 in the year-ago quarter.
Wireline Segment
Total revenues in the segment were $7,373 million, down 3.2% year over year owing to lower Business Markets revenues (down 5.5% to $836 million) and Enterprise Solutions (down 3% to $2,217 million). Partner Solutions revenues also decreased 9.2% to $1,098 million, while Consumer retail revenues declined 0.6% to $3,169 million. Other revenues were up 6% to $53 million.
Although Verizon added a net of 54,000 Fios Internet connections due to strong demand for value broadband connections, it lost 46,000 Fios Video connections amid pressures from cord-cutting of video bundles.
Quarterly operating loss was $273 million, against operating income of $62 million in the year-ago quarter. Segment EBITDA fell 18.6% to $1,298 million for EBITDA margin of 17.6% compared with 20.9% in the year-ago quarter.
Cash Flow and Liquidity
Verizon generated $34,339 million of cash from operating activities in 2018 compared with $24,318 million in the year-ago period. The year-over-year increase was driven by strong operating results, tax reform benefits, reduced impacts from the wireless device payment plan model, and lower discretionary pension and benefit contributions. At year-end 2018, Verizon had $2,745 million of cash and cash equivalents and $105,873 million in long-term debts compared with respective tallies of $2,079 million and $113,642 million. The company was able to reduce its total debt burden by $4.7 billion during 2018 due to strong cash flow and tax reform benefits.
Verizon contributed $2.3 billion to employee benefit program and remains on track to achieve cumulative cost savings of $10 billion by 2021. The company expects to achieve this goal through zero-based budgeting and the recently announced Voluntary Separation Program.
Outlook
For full-year 2019, Verizon expects GAAP revenues to increase by low single-digit percentage rates driven by expected savings from tax reform and higher cash flow from operations. Adjusted earnings per share are likely to remain flat. Capital expenditures for 2019 are likely to be in the range of $17 billion to $18 billion.
Moving Forward
With one of the most efficient wireless networks in the United States, Verizon continues to deploy the latest 4G LTE Advanced technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investment. During the quarter, Verizon launched the world’s first commercial 5G broadband Internet service in select markets. Dubbed Verizon 5G Home, the service was initially made available in select regions in Houston, Indianapolis, Los Angeles and Sacramento. The company expects to continue this healthy growth momentum in 5G with upcoming smartphone models and wider coverage across the country.
We remain impressed with the healthy growth prospects of this Zacks Rank #2 (Buy) stock. Other notable stocks in the industry include United States Cellular Corporation (USM - Free Report) , ATN International, Inc. (ATNI - Free Report) and Sprint Corporation (S - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank(Strong Buy)stocks here.
United States Cellular Corporation delivered average positive earnings surprise of 340.4% in the trailing four quarters, beating estimates in each.
ATN International has delivered average positive earnings surprise of 146.1% in the trailing four quarters, beating estimates thrice.
Sprint has a long-term earnings growth expectation of 19.6%. It delivered average positive earnings surprise of 320.8% in the trailing four quarters, beating estimates on each occasion.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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