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Verizon Raises Capital Outlay View for Higher 5G Investments

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Verizon Communications Inc. (VZ - Free Report) recently raised its capital expenditure guidance for 2020 on higher planned investments to augment the infrastructure for increased 5G deployment across the United States. The company expects that the increased capital outlay would enable it to meet the higher demand for video-intensive applications and support the transition to the super-fast 5G network.

For 2020, Verizon anticipates capital expenditure of $17.5-$18.5 billion, up from $17-$18 billion expected earlier. These include the addition of small cells, MIMO antenna technology advancements and extensive fiber network connectivity for greater capacity and speed for customers. The company expects such focused infrastructure upgrade to better equip the country to fight disruptive market forces led by the coronavirus pandemic.

Verizon further aims to harness the potential of carrier aggregation, which refers to an amalgamation of two or more channel spectrums into a unified data channel, to enhance data throughput capacity. The company has collaborated with Qualcomm Incorporated (QCOM - Free Report) , Samsung Electronics and Lenovo to achieve peak speeds of 4.2 gigabits per second on its live 5G network. The tech bellwethers combined eight distinct channels of millimeter waves to reach an unprecedented 4.2 Gbps speed on Verizon’s live 5G network. The pilot run utilized Samsung’s 28 GHz New Radio Access Unit, which is the industry’s first integrated radio for the mmWave spectrum.

Over the last few quarters, Verizon has systematically invested in 5G technology to gain a foothold in the ecosystem. Its 5G Ultra-Wideband mobility service is currently available in 34 U.S. cities with seven 5G-enabled devices and 17 NFL Stadiums. The company continues to promulgate next-gen 5G technologies to maintain its market share as the largest national wireless carrier.

Moving forward, Verizon expects considerable growth in both its Wireless and Wireline businesses in 2020. The company expects a healthy improvement in margins on the back of continued strong FiOS network and services in the Wireline business. The company’s efforts to improve profitable growth include enhancing operating and capital efficiency. In the enterprise and wholesale businesses, Verizon is changing its revenue mix toward newer growth services like cloud, security and professional services. Also, the company is looking forward to capitalize on the countless innovative technology solutions being developed in the Internet of Things and the telematics ecosystem across multiple industries. Further, the company’s focus on online content delivery, mobile video and online advertising should stoke growth.

Shares of Verizon have lost 11.6% in the past year compared with the industry’s decline of 3.3%.

The company presently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include Motorola Solutions, Inc. (MSI - Free Report) and Viasat Inc. (VSAT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Motorola has a long-term earnings growth expectation of 8.5%. It delivered a positive earnings surprise of 6.6%, on average, in the trailing four quarters.

Viasat delivered a positive earnings surprise of 402%, on average, in the trailing four quarters.

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