Back to top

Image: Bigstock

Can Verizon (VZ) Q2 Earnings Ride on Healthy Top-Line Growth?

Read MoreHide Full Article

Verizon Communications Inc. (VZ - Free Report) is scheduled to report second-quarter 2021 results on Jul 21, before the opening bell. In the last reported quarter, the New York-based telecom and media giant beat the Zacks Consensus Estimate by 2 cents.

The company is expected to have recorded higher aggregate revenues year over year, despite disruptions caused by the COVID-19 pandemic, driven by a healthy momentum in its wireless business.

Factors at Play

During the second quarter, Verizon continued the aggressive rollout of 5G Ultra Wideband service to expand its coverage to 71 cities across the country. The company also deployed Home Internet service in select cities, where users experience a maximum download speed of up to 1 Gbps, to bring its coverage to 40 markets. It further expanded its 5G Business Internet service to 24 cities that offers an alternative to cable broadband. The diversified offerings for different user groups are expected to get reflected in the second-quarter results.

In the quarter, Verizon offered the best of LTE and 5G Ultrawideband facilities with the launch of On Site 5G — a transformative on-premises, private 5G network — for business enterprises. This customized solution enables firms that were hitherto crippled with coverage gaps, lost connectivity, fractured security, data congestion and inconsistent service quality to have a dedicated capacity with adequate bandwidth to minimize costly downtime and missed opportunities. Verizon also launched Hyper Precise Location service —  a Software-as-a-Service offering that provides real-time global navigation satellite system data with precision accuracy —  in more than 100 major U.S. markets. These are expected to have driven the company’s top-line growth.

In order to help fleet customers experience a seamless transition to 4G network connectivity as the legacy 3G network is slated for sunset by the end of 2022, it launched Verizon Connect solution. This will enable fleet operators to migrate their vehicle tracking units to a faster 4G network with extended wireless network coverage, higher bandwidth and lower latency. The company also extended its Digital Out-of-Home portfolio with a one-stop solution for advertisers to effectively execute and measure promotional campaigns as well as drive operational efficiencies in media investments. Such initiatives are likely to have led to top-line growth in the second quarter.

During the second quarter, Verizon expanded its 5G collaboration with Amazon Web Services to deliver a private mobile edge computing solution to enterprise customers. It collaborated with Honda Motor to explore various ways in which safe driving could be practiced to avert accidents by leveraging its 5G Ultra Wideband, mobile edge computing platform and Vehicle-to-Everything communication systems.

In addition, Verizon aimed to harness the power of the newly acquired C-Band spectrum for faster 5G rollout across the country and started the installation of equipment from Ericsson and Samsung Electronics. It also inked deals with  two of the leading independent operators of wireless communication towers in the United States, while deploying signal repeaters from two different firms at multiple points across its network to augment 5G Ultra Wideband coverage and improve end-user experience. These partnerships are likely to have improved its revenues in the to-be-reported quarter.

The Zacks Consensus Estimate for total revenues for the company stands at $32,634 million. It generated revenues of $30,447 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $1.29 per share, indicating a healthy improvement from $1.18 reported in the year-earlier quarter.

Key Developments in Q2

During the second quarter, Verizon inked an agreement to acquire Senion —  a Sweden-based firm that specializes in location-responsive solutions. The buyout for an undisclosed amount is likely to enable the carrier to scale up location awareness in IoT devices and harness its power to build customizable solutions with end-to-end development. This, in turn, is likely to enable the company to better serve its customers by integrating Senion’s indoor wayfinding, geofencing, location sharing, analytics and predictive intelligence technology with its 5G platform.

During the quarter, Verizon also inked a deal with Apollo Global Management, Inc. to sell its media business — Verizon Media — for $5 billion. The deal covers Verizon Media’s assets, including iconic brands such as Yahoo and AOL, and leading ad tech and media platform businesses. This carve-out will allow Verizon Media to aggressively pursue growth areas.

Earnings Whispers

Our proven model predicts an earnings beat for Verizon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.79%, with the former pegged at $1.31 per share and latter at $1.29. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 

Zacks Rank: Verizon currently has a Zacks Rank #3.

Other Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:

Nokia Corporation (NOK - Free Report) is set to release quarterly numbers on Jul 30. It has an Earnings ESP of +4.35% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Motorola Solutions, Inc. (MSI - Free Report) is +0.59% and it carries a Zacks Rank of 2. The company is set to report quarterly numbers on Aug 5.

The Earnings ESP for T-Mobile US Inc. (TMUS - Free Report) is +13.75% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Aug 5.

Published in