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Will Soft Revenues Affect Verizon's (VZ) Earnings in Q3?
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Verizon Communications Inc. (VZ - Free Report) is scheduled to report third-quarter 2023 results before the opening bell on Oct 24. In the last reported quarter, the telecom giant beat the Zacks Consensus Estimate by 4 cents. The company is expected to have recorded lower aggregate revenues year over year despite healthy momentum in the core wireless business, owing to a challenging macroeconomic environment.
Factors at Play
During the third quarter, Verizon got full access to the 5G C-band spectrum that enabled customers to use a full 160 MHz of spectrum, nearly tripling the 5G bandwidth connectivity. This further helped the company to expand and enhance its 5G Ultra Wideband network, offering greater capacity to accommodate more customers with robust services and higher data speeds. The additional spectrum also enabled Verizon to offer 5G Home broadband and Business Internet services to more customers. These are likely to be reflected in the upcoming quarterly results.
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 toll. Our estimate for revenues from the Consumer segment is pegged at $24,008 million, down from $25,840 recorded in third-quarter 2022.
In the quarter, Verizon unveiled a new vehicle that delivers a private network, private mobile edge compute, SD-Wan and satellite connectivity to customer locations. Dubbed Mobile Onsite Network-as-a-Service (NaaS), the solution supports both 4G and 5G standalone functionality. It provides scalable, reliable 5G and edge compute that can be managed locally by enterprise and public sector customers for enhanced operational flexibility without any costs entailed in a permanent installation.
During the quarter, Verizon successfully completed data and voice sessions over its 5G network using Ericsson's new RedCap-compatible software and MediaTek’s RedCap testing platform. The technology offers an ideal solution for lower-complexity and lower-cost NR devices such as consumer wearables, fitness trackers and mobile medical devices. It also paves the way for enterprise IoT solutions like video surveillance, industrial sensors and smart grids to run more efficiently on Verizon’s 5G network. These are likely to have translated into incremental revenues in the quarter. Our estimate for revenues from the Business segment is pegged at $7,694 million.
However, adverse foreign currency translations, infrastructure investments and high operating costs for 5G deployments are likely to have led to soft margins in the quarter. Moreover, the promotional offers and lucrative discounts are expected to have weighed on margins. In addition, the company’s wireline division is struggling with persistent losses in access lines owing to competitive pressure from the voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data and video) offerings by cable companies.
Verizon also recorded high capital expenditures for the launch and continued build-out of its 5G Ultra-Wideband network, deployment of significant fiber assets across the country and upgrade to Intelligent Edge Network architecture.
For the September quarter, the Zacks Consensus Estimate for revenues is pegged at $33,390 million. It reported revenues of $34,241 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 $1.32.
Earnings Whispers
Our proven model does not predict an earnings beat for Verizon for the third 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 -0.38%. 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 Silicon Motion Technology Corporation (SIMO - Free Report) is +3.00% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Nov 1.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +3.98% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct 25.
Image: Bigstock
Will Soft Revenues Affect Verizon's (VZ) Earnings in Q3?
Verizon Communications Inc. (VZ - Free Report) is scheduled to report third-quarter 2023 results before the opening bell on Oct 24. In the last reported quarter, the telecom giant beat the Zacks Consensus Estimate by 4 cents. The company is expected to have recorded lower aggregate revenues year over year despite healthy momentum in the core wireless business, owing to a challenging macroeconomic environment.
Factors at Play
During the third quarter, Verizon got full access to the 5G C-band spectrum that enabled customers to use a full 160 MHz of spectrum, nearly tripling the 5G bandwidth connectivity. This further helped the company to expand and enhance its 5G Ultra Wideband network, offering greater capacity to accommodate more customers with robust services and higher data speeds. The additional spectrum also enabled Verizon to offer 5G Home broadband and Business Internet services to more customers. These are likely to be reflected in the upcoming quarterly results.
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 toll. Our estimate for revenues from the Consumer segment is pegged at $24,008 million, down from $25,840 recorded in third-quarter 2022.
In the quarter, Verizon unveiled a new vehicle that delivers a private network, private mobile edge compute, SD-Wan and satellite connectivity to customer locations. Dubbed Mobile Onsite Network-as-a-Service (NaaS), the solution supports both 4G and 5G standalone functionality. It provides scalable, reliable 5G and edge compute that can be managed locally by enterprise and public sector customers for enhanced operational flexibility without any costs entailed in a permanent installation.
During the quarter, Verizon successfully completed data and voice sessions over its 5G network using Ericsson's new RedCap-compatible software and MediaTek’s RedCap testing platform. The technology offers an ideal solution for lower-complexity and lower-cost NR devices such as consumer wearables, fitness trackers and mobile medical devices. It also paves the way for enterprise IoT solutions like video surveillance, industrial sensors and smart grids to run more efficiently on Verizon’s 5G network. These are likely to have translated into incremental revenues in the quarter. Our estimate for revenues from the Business segment is pegged at $7,694 million.
However, adverse foreign currency translations, infrastructure investments and high operating costs for 5G deployments are likely to have led to soft margins in the quarter. Moreover, the promotional offers and lucrative discounts are expected to have weighed on margins. In addition, the company’s wireline division is struggling with persistent losses in access lines owing to competitive pressure from the voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data and video) offerings by cable companies.
Verizon also recorded high capital expenditures for the launch and continued build-out of its 5G Ultra-Wideband network, deployment of significant fiber assets across the country and upgrade to Intelligent Edge Network architecture.
For the September quarter, the Zacks Consensus Estimate for revenues is pegged at $33,390 million. It reported revenues of $34,241 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 $1.32.
Earnings Whispers
Our proven model does not predict an earnings beat for Verizon for the third 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 -0.38%. 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 #4 (Sell).
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 Oct 26. It has an Earnings ESP of +12.98% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Silicon Motion Technology Corporation (SIMO - Free Report) is +3.00% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Nov 1.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +3.98% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct 25.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.