Earnings Preview: Verizon to report 1Q results
NEW YORK (AP) — Before the stock market opens Thursday, Verizon Communications Inc. is expected to report first-quarter results reflecting a relatively quiet three months after the previous quarter marked by excitement over the new iPhone.
WHAT TO WATCH FOR: The first quarter represents a cooling-down period from the fervor of the fourth quarter, which saw the launch of the iPhone 4S. The launch of a new iPhone model always cause a big earnings hit to cellphone companies, since they subsidize each new phone by hundreds of dollars.
Growth has slowed rapidly in the wireless industry, since nearly everyone already has a cellphone, and sales of data plans for new devices like iPads haven't picked up the slack. That means cellphone companies are pulling subscribers from each other, and Verizon Wireless, the largest carrier, is playing this game well.
Analysts expect that Verizon added a net 470,000 new subscribers on contract-based plans in the first quarter. That number is closely watched because contract-based plans are the most lucrative.
Phone companies like Verizon would like to curb their spending on iPhones. Just after the end of the quarter, Verizon introduced an "upgrade fee" of $30 for customers who want to trade up to new phones. On the post-report conference call, Verizon executives might discuss other means to make phone upgrades less costly for the company.
In the quarter, Verizon announced a Netflix-like streaming video service in a joint venture with Coinstar Inc., which runs the Redbox DVD vending machines. The service is set to launch later this year. Executives might discuss their plans Thursday.
Though Verizon Wireless is a big growth engine, only 55 percent of its earnings flow through to New York-based Verizon Communications. The rest of the wireless division is owned by Vodafone Group PLC of Britain.
WHY IT MATTERS: Verizon Wireless had 108.7 million wireless devices on its network and 24.1 million landlines at the end of the last quarter. The stock is a component of the 30-stock blue-chip Dow Jones industrial average.
Verizon's report marks the debut for telecommunications companies this earnings season. Rival AT&T Inc. reports on Tuesday.
WHAT'S EXPECTED: Analysts polled by FactSet on average expect Verizon to report earnings of 58 cents per share on revenue of $28.2 billion.
LAST YEAR'S QUARTER: Verizon reported a profit of 51 cents per share for the first quarter of 2011. Revenue was $27 billion.
