Verizon Continues to Move Sideways
- By Sangara Narayanan
Verizon (VZ) reported its third-quarter earnings Thursday, which beat analysts' estimates but fell marginally short of revenue expectations. The largest carrier in terms of subscriber base reported a third quarter EPS of $1.01 on the back of $30.93 billion in revenues while Wall Street was expecting 99 cents earnings with $31.1 billion in revenues.
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The intrinsic value of VZ
At the time of writing this article the stock was down by 1.99%, continuing its downward trend which was set in motion in July this year. One of the major factors that has affected investor sentiment was subscriber growth as the company reported a net postpaid subscriber addition of 442,000, way below the 1.289 million the company added during the third quarter of last year.
Subscriber net addition has been coming down steadily this year, and the last four quarters' numbers do not make for happy reading. After increasing the rate of addition in the last three quarters of 2015, Verizon's pace of subscriber addition has come down sharply this year, with the company citing the highly competitive nature of the market for the slowdown.
At the end of the third quarter, Verizon had 113.7 million retail connections, a growth of 2.6% year over year. For carriers such as Verizon, subscriber growth is the one factor that will allow them to keep their top line moving, and the high level of penetration as well as competition has made life difficult for all companies, slowing down their revenue growth prospects. Wireless revenue has now declined 1.5%, 4% and 3.9% in the first three quarters of the current fiscal.
Verizon knew things were going to be difficult in the short term and even more difficult in the long term, and that is the reason why the company has been trying to build a content empire and become a force in the advertising world. It has started work in that direction, but we might still be a few years away from seeing the results of such acquisitions.
Verizon is expecting adjusted earnings to be at a level comparable to 2015, excluding the 7 cents per share impact of work stoppage this year, which means the company expects to finish the year comparatively worse than it did last year. Verizon's stock price has stayed relatively flat due to that, showing a growth of 6.62% on a year-to-date basis.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 2 Warning Sign with VZ. Click here to check it out.
The intrinsic value of VZ
