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Will Lower Consumer Revenues Dent Verizon (VZ) Q2 Earnings?
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Verizon Communications Inc. (VZ - Free Report) is scheduled to report second-quarter 2023 results before the opening bell on Jul 25. In the quarter, the Consumer segment is likely to have recorded year-over-year lower revenues, despite a healthy momentum in the wireless business, owing to a challenging macroeconomic environment.
Factors at Play
The Consumer segment includes the retail wireline and wireless businesses.
In the second quarter, Verizon successfully conducted a field demonstration of its network slicing capabilities in a commercial 5G environment. Network slicing facilitates the creation of multiple virtual networks on a shared physical network and allows operators to offer parts of the same network to different customers based on their use cases. Each network slice is individually configured with its own security measures and latency settings, customized to meet the dynamic requirements of various types of applications. The trial comprehensively assessed end-to-end data transmission capability on a virtual network slice by validating the optimum functionality of the device chipset, operating system, application, radio network base station and the network core. These are likely to get reflected in the upcoming quarterly results.
During the quarter, Verizon unveiled an exclusive promotional offer through myPlan +play perk. This included Netflix Premium Plan and Paramount+ offered together with the SHOWTIME bundle for Verizon customers. Verizon +play gives access to a wide range of subscriptions under a single platform that simplifies the process for end users and grants them enhanced control and flexibility in selecting and paying for their preferred content. The company is offering various mix-and-match pricing in wireless and home broadband plans that have historically led to increased adoption of 5G devices and premium unlimited plans.
Although this is likely to have translated into healthy customer additions, revenues from the Consumer segment are likely to have taken a hit. Our estimate for revenues from the Consumer segment is pegged at $23,891 million, down from $25,604 million reported a year ago. Our estimate for operating income from the segment stands at $7,060 million, suggesting a fall from $7,150 million.
In addition, adverse foreign currency translations and high operating costs are likely to have led to soft margins in the second quarter. Continuous infrastructure investments for fiber and 5G deployments are expected to have weighed on the margins.
The company’s wireline division is also struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. Due to challenging macroeconomic conditions and high inflationary pressures, several customers are likely to have faltered on their monthly bill payments, further affecting the quarterly performance.
Overall Expectations
The Zacks Consensus Estimate for total revenues is pegged at $33,435 million. It reported revenues of $33,789 million in the year-ago quarter. The consensus estimate for adjusted earnings per share stands at $1.17, which suggests a decline from the year-ago tally of $1.31.
Earnings Whispers
Our proven model does not predict an earnings beat for Verizon for the second quarter. 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 not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.86%, with the former pegged at $1.16 and the latter at $1.17. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Verizon Communications Inc. Price and EPS Surprise
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +3.94% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 27.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +6.56% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 26.
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Will Lower Consumer Revenues Dent Verizon (VZ) Q2 Earnings?
Verizon Communications Inc. (VZ - Free Report) is scheduled to report second-quarter 2023 results before the opening bell on Jul 25. In the quarter, the Consumer segment is likely to have recorded year-over-year lower revenues, despite a healthy momentum in the wireless business, owing to a challenging macroeconomic environment.
Factors at Play
The Consumer segment includes the retail wireline and wireless businesses.
In the second quarter, Verizon successfully conducted a field demonstration of its network slicing capabilities in a commercial 5G environment. Network slicing facilitates the creation of multiple virtual networks on a shared physical network and allows operators to offer parts of the same network to different customers based on their use cases. Each network slice is individually configured with its own security measures and latency settings, customized to meet the dynamic requirements of various types of applications. The trial comprehensively assessed end-to-end data transmission capability on a virtual network slice by validating the optimum functionality of the device chipset, operating system, application, radio network base station and the network core. These are likely to get reflected in the upcoming quarterly results.
During the quarter, Verizon unveiled an exclusive promotional offer through myPlan +play perk. This included Netflix Premium Plan and Paramount+ offered together with the SHOWTIME bundle for Verizon customers. Verizon +play gives access to a wide range of subscriptions under a single platform that simplifies the process for end users and grants them enhanced control and flexibility in selecting and paying for their preferred content. The company is offering various mix-and-match pricing in wireless and home broadband plans that have historically led to increased adoption of 5G devices and premium unlimited plans.
Although this is likely to have translated into healthy customer additions, revenues from the Consumer segment are likely to have taken a hit. Our estimate for revenues from the Consumer segment is pegged at $23,891 million, down from $25,604 million reported a year ago. Our estimate for operating income from the segment stands at $7,060 million, suggesting a fall from $7,150 million.
In addition, adverse foreign currency translations and high operating costs are likely to have led to soft margins in the second quarter. Continuous infrastructure investments for fiber and 5G deployments are expected to have weighed on the margins.
The company’s wireline division is also struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. Due to challenging macroeconomic conditions and high inflationary pressures, several customers are likely to have faltered on their monthly bill payments, further affecting the quarterly performance.
Overall Expectations
The Zacks Consensus Estimate for total revenues is pegged at $33,435 million. It reported revenues of $33,789 million in the year-ago quarter. The consensus estimate for adjusted earnings per share stands at $1.17, which suggests a decline from the year-ago tally of $1.31.
Earnings Whispers
Our proven model does not predict an earnings beat for Verizon for the second quarter. 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 not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.86%, with the former pegged at $1.16 and the latter at $1.17. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Verizon Communications Inc. Price and EPS Surprise
Verizon Communications Inc. price-eps-surprise | Verizon Communications Inc. Quote
Zacks Rank: Verizon has a Zacks Rank #3.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Intel Corporation (INTC - Free Report) is set to release quarterly numbers on Jul 27. It has an Earnings ESP of +19.64% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +3.94% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 27.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +6.56% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 26.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.