Verizon Q2 Earnings Edge Above Analyst Expectations

Verizon Communications Inc. (VZ) has announced its Q2 earnings reflecting adjusted earnings per share of $1.18, beating analyst estimates of $1.15 despite a decrease from $1.23 in the same quarter last year.

Total wireless revenue decreased by 1.7% to $15.95 billion, which barely missed the estimated $16 billion. However, consolidated revenue reflected $30.4 billion, which was slightly higher than a projected $30 billion. Also, the adjusted EBITDA was in-line at $11.5 billion.

For its consumer wireless unit, revenue was $21.1 billion, a 4% year-over-year decrease. Verizon had total revenue of $7.5 billion for business customers, which was a drop of 3.7% also year-over-year. In its media segment, revenue decreased by 24.5% from the previous year.

Verizon added 352,000 total postpaid wireless subscribers in Q2, which also exceeded Street estimates of 240,000 subscribers. However, prepaid net additions were 12,000, missing expectations of 144,000 increase.

Churn for its consumer unit, and total retail postpaid was 0.69% at 72,000 postpaid net additions. Verizon said that retail postpaid phone churn was .51% with 97,000 phone net additions and 199,000 postpaid smartphone net adds.

According to Verizon CFO Matt Ellis, 80% of its at-risk customers who have been late on their payments are still making payments and that “the vast majority” will still be customers a year from now. He highlighted customer activity at the end of Q2 with the expectation that Verizon stores will be reopening by the end of July.

MoffettNathanson analyst Craig Moffett commented on the retail postpaid phone churn percentage as being “the lowest we’ve ever seen.” He also noted his concern that Verizon may not have pushed its “Network-first strategy” as other cell carriers merged to become more prominent. The analyst believes this puts VZ at risk of falling behind others. On July 24, he reiterated a Hold rating and a $62 price target, which implies 9% upside potential.

Verizon’s 2020 guidance, calls for adjusted per-share earnings growth between a projected 2% decline and a 2% increase, with capital expenditures between $17.5 billion to $18.5 billion. Wireless revenue is expected to be flat or decreasing to 1% in Q3.

Overall, 4 analysts assign Buy ratings, 7 Hold ratings, and no Sell ratings, giving VZ a Moderate Buy Street consensus. The average analyst price target stands at $61.09, suggesting 7% upside potential, with shares down 7% year-to-date. (See Verizon’s stock analysis on TipRanks).

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