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Verizon (VZ) Beats Q3 Earnings Estimates on Higher Revenues
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Verizon Communications Inc. (VZ - Free Report) reported relatively healthy third-quarter 2022 results with the bottom line and the top line beating the respective Zacks Consensus Estimate. The telecom giant is witnessing significant 5G adoption and fixed wireless broadband momentum. However, the company lost 189,000 monthly bill-paying phone subscribers in its consumer business owing to pricier plans and reiterated its earlier guidance for 2022. This dragged the shares down in pre-market trading as investors probably expected a solid subscriber momentum.
Net Income
On a GAAP basis, net income in the quarter was $5,024 million or $1.17 per share compared with $6,554 million or $1.55 per share in the prior-year quarter. The year-over-year decrease despite top-line growth was primarily attributable to higher operating expenses.
Quarterly adjusted earnings per share were $1.32 compared with the restated tally of $1.42 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.
Verizon Communications Inc. Price, Consensus and EPS Surprise
Quarterly total operating revenues increased to $34,241 million from $32,951 million in the prior year as strong wireless service revenues and higher wireless equipment revenues were partially offset by wireline decline and divestures. The top line beat the consensus estimate of $33,782 million.
Quarterly Segment Results
Consumer: Total revenues from this segment increased 10.8% year over year to $25,840 million, driven by strong demand for higher-tier premium mobility and broadband offerings and incremental contribution from TracFone. Strong wireless service revenue momentum, healthy profitability and higher equipment revenues were witnessed in the quarter.
Service revenues were up 9.1% to $18,421 million, while wireless equipment revenues jumped 22.7% to $5,558 million, led by higher work-from-home-driven customer activities. Other revenues totaled $1,861 million, down 2.4% year over year.
Verizon recorded 189,000 wireless retail postpaid net loss in the quarter due to competitive offerings from rivals. Wireless retail postpaid churn was 1.1%, while retail postpaid phone churn was 0.88%. The company recorded 58,000 Fios Internet net additions as high demand for reliable fiber optic broadband was spurred by increasing work-from-home trend. Fixed wireless broadband net additions were 234,000 for the quarter. However, Verizon registered 95,000 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 declined 3.2% to $7,349 million with a margin of 28.4%, down from 32.5% in the year-ago quarter. EBITDA increased 0.7% to $10,581 million with a margin of 40.9% compared with 45% in the prior-year quarter.
Business: The segment revenues were up 1.9% to $7,837 million due to pricing actions and growth in customer base. Verizon had 360,000 wireless retail postpaid net additions in the quarter, including 197,000 postpaid phone net additions. Operating income declined to $698 million from $886 million in the year-ago quarter with respective margins of 8.9% and 11.5%. EBITDA was down 6.7% to $1,777 million for a margin of 22.7% compared with 24.8% in the year-earlier quarter.
Other Quarterly Details
Total operating expenses increased 9.7% year over year to $26,347 million, while operating income was down 11.4% to $7,894 million. Consolidated adjusted EBITDA declined to $12,218 million from $12,263 million for respective margins of 35.7% and 37.3% owing to the divesture of Verizon Media.
Cash Flow & Liquidity
For the first nine months of 2022, Verizon generated $28,199 million of net cash from operating activities compared with $31,162 million in the year-ago period. The reduction was primarily induced by working capital impacts as the increase in activation volumes affected receivable levels, and higher inventory levels as part of supply chain management. Free cash flow for the first nine months of 2022 was $12,388 million compared with $17,301 million in the prior-year period.
As of Sep 30, 2022, the company had $2,082 million in cash and cash equivalents with $132,912 million of long-term debt. Capital expenditure for the first nine months of 2022 totaled $15,811 million, up from $13,861 million in prior-year period, driven by expenses of $4.5 billion related to C-Band deployment. The continued build out of OneFiber and C-Band spectrum expansion will expand the reach and capacity of its 5G Ultra Wideband network across the country.
Guidance Reiterated
Verizon has reiterated its earlier guidance for 2022 and expects organic service and other revenue growth to be down 1% to flat year over year. Reported wireless service revenue growth is expected in the range of 8.5%-9.5%. Adjusted EBITDA is likely to be down 1.5% to flat. The company expects adjusted earnings in the range of $5.10 to $5.25 per share. Capital expenditure, excluding C-Band, is estimated between $16.5 billion and $17.5 billion.
Sierra Wireless has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 229.9%, on average, in the trailing four quarters. Over the past year, the stock has gained 80.3%. Earnings estimates for the current year have moved up 4400% since October 2021. Sierra Wireless continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, is another key pick for investors. It has a long-term earnings growth expectation of 25% and delivered a stellar earnings surprise of 81.9%, on average, in the trailing four quarters.
InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and ability to penetrate different markets are impressive.
Aviat Networks, Inc. (AVNW - Free Report) sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 23.3% upward since October 2021.
Aviat Networks pulled off a trailing four-quarter earnings surprise of 15.9%, on average. It has soared 158.8% in the past two years.
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Verizon (VZ) Beats Q3 Earnings Estimates on Higher Revenues
Verizon Communications Inc. (VZ - Free Report) reported relatively healthy third-quarter 2022 results with the bottom line and the top line beating the respective Zacks Consensus Estimate. The telecom giant is witnessing significant 5G adoption and fixed wireless broadband momentum. However, the company lost 189,000 monthly bill-paying phone subscribers in its consumer business owing to pricier plans and reiterated its earlier guidance for 2022. This dragged the shares down in pre-market trading as investors probably expected a solid subscriber momentum.
Net Income
On a GAAP basis, net income in the quarter was $5,024 million or $1.17 per share compared with $6,554 million or $1.55 per share in the prior-year quarter. The year-over-year decrease despite top-line growth was primarily attributable to higher operating expenses.
Quarterly adjusted earnings per share were $1.32 compared with the restated tally of $1.42 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.
Verizon Communications Inc. Price, Consensus and EPS Surprise
Verizon Communications Inc. price-consensus-eps-surprise-chart | Verizon Communications Inc. Quote
Revenues
Quarterly total operating revenues increased to $34,241 million from $32,951 million in the prior year as strong wireless service revenues and higher wireless equipment revenues were partially offset by wireline decline and divestures. The top line beat the consensus estimate of $33,782 million.
Quarterly Segment Results
Consumer: Total revenues from this segment increased 10.8% year over year to $25,840 million, driven by strong demand for higher-tier premium mobility and broadband offerings and incremental contribution from TracFone. Strong wireless service revenue momentum, healthy profitability and higher equipment revenues were witnessed in the quarter.
Service revenues were up 9.1% to $18,421 million, while wireless equipment revenues jumped 22.7% to $5,558 million, led by higher work-from-home-driven customer activities. Other revenues totaled $1,861 million, down 2.4% year over year.
Verizon recorded 189,000 wireless retail postpaid net loss in the quarter due to competitive offerings from rivals. Wireless retail postpaid churn was 1.1%, while retail postpaid phone churn was 0.88%. The company recorded 58,000 Fios Internet net additions as high demand for reliable fiber optic broadband was spurred by increasing work-from-home trend. Fixed wireless broadband net additions were 234,000 for the quarter. However, Verizon registered 95,000 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 declined 3.2% to $7,349 million with a margin of 28.4%, down from 32.5% in the year-ago quarter. EBITDA increased 0.7% to $10,581 million with a margin of 40.9% compared with 45% in the prior-year quarter.
Business: The segment revenues were up 1.9% to $7,837 million due to pricing actions and growth in customer base. Verizon had 360,000 wireless retail postpaid net additions in the quarter, including 197,000 postpaid phone net additions. Operating income declined to $698 million from $886 million in the year-ago quarter with respective margins of 8.9% and 11.5%. EBITDA was down 6.7% to $1,777 million for a margin of 22.7% compared with 24.8% in the year-earlier quarter.
Other Quarterly Details
Total operating expenses increased 9.7% year over year to $26,347 million, while operating income was down 11.4% to $7,894 million. Consolidated adjusted EBITDA declined to $12,218 million from $12,263 million for respective margins of 35.7% and 37.3% owing to the divesture of Verizon Media.
Cash Flow & Liquidity
For the first nine months of 2022, Verizon generated $28,199 million of net cash from operating activities compared with $31,162 million in the year-ago period. The reduction was primarily induced by working capital impacts as the increase in activation volumes affected receivable levels, and higher inventory levels as part of supply chain management. Free cash flow for the first nine months of 2022 was $12,388 million compared with $17,301 million in the prior-year period.
As of Sep 30, 2022, the company had $2,082 million in cash and cash equivalents with $132,912 million of long-term debt. Capital expenditure for the first nine months of 2022 totaled $15,811 million, up from $13,861 million in prior-year period, driven by expenses of $4.5 billion related to C-Band deployment. The continued build out of OneFiber and C-Band spectrum expansion will expand the reach and capacity of its 5G Ultra Wideband network across the country.
Guidance Reiterated
Verizon has reiterated its earlier guidance for 2022 and expects organic service and other revenue growth to be down 1% to flat year over year. Reported wireless service revenue growth is expected in the range of 8.5%-9.5%. Adjusted EBITDA is likely to be down 1.5% to flat. The company expects adjusted earnings in the range of $5.10 to $5.25 per share. Capital expenditure, excluding C-Band, is estimated between $16.5 billion and $17.5 billion.
Zacks Rank & Stock to Consider
Verizon currently has a Zacks Rank #3 (Hold).
A better-ranked stock in the broader industry is Sierra Wireless, Inc. , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sierra Wireless has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 229.9%, on average, in the trailing four quarters. Over the past year, the stock has gained 80.3%. Earnings estimates for the current year have moved up 4400% since October 2021. Sierra Wireless continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, is another key pick for investors. It has a long-term earnings growth expectation of 25% and delivered a stellar earnings surprise of 81.9%, on average, in the trailing four quarters.
InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and ability to penetrate different markets are impressive.
Aviat Networks, Inc. (AVNW - Free Report) sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 23.3% upward since October 2021.
Aviat Networks pulled off a trailing four-quarter earnings surprise of 15.9%, on average. It has soared 158.8% in the past two years.