Verizon Communications, (VZ - Free Verizon Stock Report) the telecommunications giant and Dow-30 component, reported second-quarter earnings of $1.23 a share, three cents above our estimate and 2.5% higher than the year-ago result, on a relatively flat top-line comparison. Investors seemed unphased by the company's performance, with Verizon stock up a modest 1% on the news.
Beginning in the June interim, Verizon reported financial and operational results under its new reporting structure, Verizon 2.0. Under this structure, there are two reportable segments: Consumer and Business. Verizon previously reported results for its Wireless and Wireline segments, so for comparison purposes this quarter, we will defer to the old system.
As is usually the case, Verizon Wireless was once again the fair-haired boy, with the division reporting a 1.0% uptick in June-quarter revenue, the seventh time the company has posted year-over-year wireless revenue growth in two years. What's more, service revenues, which were in decline last year, were up a solid 3.1%, thanks to customer step-ups to higher priced plans, contributions from strong retail postpaid additions, and an increase in connections per account. Moreover, VZ Wireless added 451,000 retail postpaid net additions during the June interim (compared to 531,000 such connections this time last year), brining Verizon's total number of retail connections to 113.9 million, up 2.0% year over year.
Separately, total revenues for the Wireline division was down 4.5% year over year, as growth in high-quality fiber products was once again offset by pricing pressures on legacy products and technology shifts. However, FiOS revenues grew 1.9%, with Verizon adding a net 34,000 FiOS Internet connections and losing a net 52,000 FiOS Video connections, which comes as no surprise given the shift away from traditional linear video bundles.
Verizon is slated to spend approximately $17 billion to $18 billion for capital expenditures this year, and first-half cap ex came in at $8.0 billion. These expenditures continue to support the launch and build-out of its 5G Ultra Wideband network, the growth in data and video traffic on the company's 4G LTE network, the deployment of significant fiber in markets nationwide, and the upgrade to Verizon's Intelligent Edge Network architecture.
Last year, the company announced a goal of achieving $10 billion in total cash savings by 2021. Thus far, the initiative has yielded $4.1 billion in cash savings. At the end of the second quarter, Verizon completed the third and final phase of its Voluntary Separation Program and has realized about $480 million of expense savings year to date.
All told, we have ratcheted up our 2019 earnings call by a nickel, to $4.80 a share, on a modest top-line improvement.
This blue chip stock remains a good choice for conservative investors, due to its well above-average dividend yield, Highest (1) Safety rank, and attractive appreciation potential through the early years of the coming decade.
About The Company: Verizon Communications was created by the merger of Bell Atlantic and GTE in June of 2000. It is a diversified telecom company with a network that covers a population of about 298 million and provides service to nearly 98.2 million. In the decade or so, it has acquired MCI (1/06), Alltel (1/09) and Yahoo! (6/17). The company is also the largest provider of print and on-line directory information. Has a wireline presence in 28 states & Washington, D.C. and a wireless presence in every U.S. state & D.C., as well as operations in 19 countries.
– Kenneth A. Nugent
