Verizon Communications, (VZ – Free Verizon Stock Report) the telecom giant and Dow-30 component, has reported September-period earnings of $1.25 a share, two cents above our estimate and a modest 2% higher than the year-ago figure, on a 1% top-line improvement. Investors seemed rather unfazed with the company's performance, with Verizon stock more or less flat on the news.
Beginning in the June quarter, Verizon started reporting financial and operational results under its new operational structure, Verizon 2.0. Under this new structure, there are two reportable segments: Consumer and Business. This reflects the company's customer-centric approach to address evolving customer needs, deliver best-in-class customer experiences, and drive continued leadership in 5G.
Total Verizon Consumer revenues for the third quarter came in at $22.7 billion, up 1.4% year over year, with the much of the good news attributable to continued strong growth in wireless service revenue and FiOS service offerings, offset a bit by declines in wireless equipment and legacy wireline services. Consumer wireless service revenues were up 2.1% in the interim, driven by customer step- ups to higher-priced plans and an increase in connections per account. What's more, the Consumer segment added 193,00 wireless retail postpaid net additions in the third quarter, while the Business division reported 408,000 such additions during the period, bringing Verizon's total number of retail connections to 118.7 million (up 1.5% year over year). And truth be told, Business revenues, which were basically flat year over year, continue to be hurt by declines in legacy wireline products and the shift away from traditional linear video bundles.
Verizon is on target to spend approximately $17 billion to $18 billion for on capital projects in 2019, and year-to-date capex came in at $12.3 billion. These expenditures continue to support the launch and build-out of Verizon's 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.
In 2018, the company announced a goal of achieving $10 billion in total cash savings. The initiative has yielded $4.6 billion of cumulative cash savings since its inception. By the end of the September quarter, Verizon had realized over $400 million of expense savings from the Voluntary Separation Program, thereby resulting in roughly $900 million in expense savings year to date.
All told, Verizon is on track to report 2019 earnings of approximately $4.83 a share, with a modest increase likely in the cards for the coming year. This blue-chip stock remains a good choice for conservative portfolios, thanks to its impressive dividend yield (almost twice that of the Value Line median), Safety rank of 1 (Highest), and above-average capital-appreciation potential over the next three to five years.
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
