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Will Verizon (VZ) Miss Earnings Estimates This Quarter?

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Leading U.S. telecom operator, Verizon Communication Inc. (VZ - Free Report) , is set to release its second-quarter 2014 results before the opening bell on Jul 22, 2014.

In the last quarter, the company delivered a negative 3.45% earnings surprise. However, the company has delivered positive earnings surprises in three of the last four quarters, with an average beat of 0.54%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Despite having strong foothold within the wireless and wireline sectors, persistent erosion in access lines, uncertain returns from investments, iPhone subsidies, hindrances in spectrum deals and intense competition may act as headwinds for Verizon, going forward. Moreover, we remain wary of a weak enterprise customer premises equipment (CPE) business. Further, slower strategic services revenue growth also remains a deterrent for the company. Future dividend growth is also likely to be moderate due to the need to clear debt after the acquisition of Vodafone's 45% ownership in Verizon Wireless.

Earnings Whispers

Our proven model does not conclusively show that Verizon Communications is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below

Negative Zacks ESP: This is because the Most Accurate Estimate is 89 cents while the Zacks Consensus Estimate is higher at 90 cents. This leads to an ESP of -1.11% for Verizon Communications.

Zacks Rank #3 (Hold): Though Verizon’s Zacks Rank #3 increases the predictive power of ESP, we caution investors against the stock going into the earnings announcement, as a Zacks Earnings ESP of -1.11% combined with a Zacks Rank # 3 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

Shenandoah Telecommunications Co. (SHEN - Free Report) has an earnings ESP of +2.50% and a Zacks Rank #1 (Strong Buy).

BCE Inc. (BCE - Free Report) has an earnings ESP of +1.27% and carries a Zacks Rank #2 (Buy).

TELUS Corporation (TU - Free Report) has an earnings ESP of +1.85% and a Zacks Rank #2.


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