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Verizon (VZ) Surpasses Earnings & Revenue Estimates in Q4

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Verizon Communications Inc. (VZ - Free Report) reported impressive fourth-quarter 2021 results, wherein both the bottom and the top lines beat the Zacks Consensus Estimate.

The telecom giant is witnessing significant 5G adoption and fixed wireless broadband momentum. It currently covers more than 95 million people in the country with 5G Ultra Wideband.

Net Income

On a GAAP basis, net income in the quarter was $4,613 million or $1.11 per share compared with $4,588 million or $1.11 per share in the prior-year quarter. In 2021, net income was $22,065 million or $5.32 per share compared with $17,801 million or $4.30 per share in 2020.

Quarterly adjusted earnings per share were $1.31 compared with $1.21 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents.

Revenues

Quarterly total operating revenues decreased 1.8% year over year to $34,067 million. Adjusting for the sale of Verizon Media on Sep 1, 2021, operating revenues grew 4.8% year over year. Strong wireless service revenue growth and wireless equipment revenues were offset by declines in legacy wireline products. The top line beat the consensus estimate of $33,828 million. In 2021, total operating revenues increased 4.1% year over year to $133,613 million.

Quarterly Segment Results

Consumer: Total revenues from this segment increased 7.4% year over year to $25,697 million, driven by strong demand for higher-tier premium mobility and broadband offerings. Strong wireless service revenue momentum, healthy profitability and significant Fios revenue growth were witnessed in the quarter.

Service revenues were up 7.2% to $17,564 million, while wireless equipment revenues jumped 14.8% to $6,320 million, led by higher work-from-home-driven customer activities. Other revenues totaled $1,813 million, down 10.6% year over year.

Verizon recorded 667,000 wireless retail postpaid net additions in the quarter. This comprised 336,000 phone net additions and 369,000 other connected device net additions, partially offset by 38,000 tablet net losses.

Wireless retail postpaid churn was 0.94%, while retail postpaid phone churn was 0.77%. The company recorded 51,000 Fios Internet net additions as high demand for reliable fiber optic broadband was spurred by increasing work-from-home trend. However, Verizon registered 69,000 Fios Video net losses in the quarter, reflecting the ongoing shift from traditional linear video to over-the-top offerings.

The segment’s operating income improved 3.9% to $7,349 million with a margin of 28.6%, down from 29.6% in the year-ago quarter. EBITDA increased 4.1% to $10,349 million with a margin of 40.3% compared with 41.5% in the prior-year quarter.

Business: The segment revenues were down 3% to $7,810 million due to a decline in legacy wireline. Verizon had 391,000 wireless retail postpaid net additions in the quarter, including 222,000 phone net additions. Operating income declined to $796 million from $950 million in the year-ago quarter with respective margins of 10.2% and 11.8%. EBITDA was down 7.4% to $1,834 million for a margin of 23.5% compared with 24.6% in the year-earlier quarter.

Other Quarterly Details

Total operating expenses decreased 3.8% year over year to $26,459 million, while operating income increased 6% to $7,608 million. Adjusted EBITDA improved to $11,765 million from $11,724 million for respective margins of 34.5% and 33.8%.

Cash Flow & Liquidity

In 2021, Verizon generated $39,539 million of net cash from operating activities compared with $41,768 million in 2020. Free cash flow was $19,253 million compared with $23,576 million.

As of Dec 31, 2021, the company had $2,921 million in cash and cash equivalents with $143,425 million of long-term debt.

2022 Guidance

For 2022, Verizon expects organic service and other revenue growth to be about 3%. On a reported basis, which includes the net impact of the sale of Verizon Media and the company’s ownership of TracFone, service and other revenue growth is expected to be between 1% and 1.5%.

Reported wireless service revenue growth is expected in the range of 9-10%. Excluding the impact of the TracFone acquisition, wireless service revenue is expected to grow at least 3%.

Adjusted EBITDA is likely to grow between 2% and 3%. The company expects adjusted earnings in the range of $5.40 to $5.55 per share. Adjusted income tax rate is expected between 23% and 25%. Capital expenditure, excluding C-Band, is estimated between $16.5 billion and $17.5 billion.

Zacks Rank & Stocks to Consider

Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vocera Communications, Inc. (VCRA - Free Report) is a better-ranked stock in the broader Zacks Computer and Technology sector that sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 6.2% upward over the past 60 days.

Vocera Communications delivered a trailing four-quarter earnings surprise of 109.6%, on average. The stock has returned 76.3% in the past year.

SeaChange International, Inc. (SEAC - Free Report) carries a Zacks Rank #2 (Buy). The consensus estimate for current-year earnings has been revised 10% upward over the past 60 days.

SeaChange International delivered a trailing four-quarter earnings surprise of 37.2%, on average. The stock has inched up 6.8% in the past year.

Qualcomm, Inc. (QCOM - Free Report) , carrying a Zacks Rank #2, is another solid pick for investors. The consensus estimate for current-year earnings has been revised 0.7% upward over the past 60 days.

Qualcomm delivered a trailing four-quarter earnings surprise of 11.2%, on average. It has appreciated 4.6% in the past year.