Verizon (VZ) beats fourth quarter revenue estimates, offers bullish view

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Verizon Communications Inc. VZ ended 2020 on a high note, posting relatively strong fourth quarter results, with both top and bottom results beating Zacks’ consensus estimate. This highlights a disciplined network strategy for long-term growth as well as a focused roadmap for technology leadership. Verizon expects to see strong 5G momentum by 2021, supported by a customer-centric business model and diligent execution of operational plans.

Net revenue

Based on GAAP, net income for the December quarter was $ 4,718 million or $ 1.11 per share, compared to $ 5,217 million or $ 1.23 per share in the prior year quarter. The year-over-year decrease is primarily attributable to the provision for income taxes in the quarter presented compared to the reduction in income taxes in the prior year. Excluding one-time items, non-GAAP net income for the reported quarter was $ 1.21 per share and topped Zacks’ consensus estimate by 5 cents. For the year 2020, the company reported net income (GAAP) of $ 18,348 million or $ 4.30 per share, compared to $ 19,788 million or $ 4.65 per share in 2019 due to headwinds from COVID -19.

Verizon Communications Inc. Price, Consensus and Surprise EPS

Verizon Communications Inc. Surprise-Price-Consensus-EPS-Surprise Graph | Quote from Verizon Communications Inc.

Income

Quarterly total operating revenue was nearly flat year over year at $ 34,692 million as total wireless revenue growth and strong performance from Verizon Media were offset by lower revenue wireless equipment and the decline in traditional wired products. The top line broke the consensus estimate of $ 34,444 million. For the full year 2020, total operating revenue decreased to $ 128,292 million, from $ 131,868 million in 2019.

Segment results

Consumer: Total revenue decreased 1.2% year over year to $ 23,919 million due to a significant decline in wireless equipment revenue due to low activation levels . Service revenues were flat at $ 16,388 million, while wireless equipment revenues declined 3.8% to $ 5,503 million due to lower customer activity. clients. Other income totaled $ 2,028 million, down 5.4% year over year.

During the quarter, Verizon recorded 357,000 net postpaid wireless retail additions. This includes 163,000 net additions of phones and 81,000 net losses of tablets, offset by 275,000 other net additions of connected devices. Net postpaid smartphone additions were 284,000 thanks to the launch of new models and the gradual reopening of all retail stores operated by the company with full security precautions. The total churn rate for retail postpaid services was 0.96%, while that for retail postpaid phones was 0.76%. The company recorded 92,000 Fios Internet net additions with an increasing trend towards working from home.

Segment operating profit improved 2.7% to $ 7,073 million for an operating margin of 29.6%, up from 28.4% in the last year quarter. Segment EBITDA increased 2.9% to $ 9,937 million, reflecting a margin of 41.5% compared to 39.9% in the prior year quarter.

Business: Segment revenue was flat at $ 8,050 million as Verizon responded effectively to the challenges of COVID-19, handling increased traffic needs while meeting increased demand for connectivity and devices. The company recorded 346,000 net additions of postpaid retail wireless services during the quarter. This includes 116,000 net additions of phones, 116,000 net additions of tablets and 114,000 other additions of connected devices.

The segment’s operating profit was $ 950 million compared to $ 666 million in the last quarter for margins of 11.8% and 8.3% respectively. Segment EBITDA increased 18.4% to $ 1,981 million, for a margin of 24.6% compared to 20.7% in the previous year quarter.

Verizon Media’s revenue grew 11.4% to $ 2.3 billion on strong advertising trends.

Other details

Total operating expenses decreased 2.2% year over year to $ 27,512 million, while operating income increased 8.1% year over year the other to $ 7,180 million. Adjusted EBITDA was $ 11,724 million for a respective margin of 33.8%.

Cash flow and liquidity

For 2020, Verizon generated $ 41,768 million in net cash from operating activities, up from $ 35,746 million in 2019, thanks to a strong business environment and lower working capital requirement due to lower the volume of wireless services. Free cash flow (non-GAAP) was $ 23.6 billion, up 32.4% year-over-year. As at December 31, 2020, the company had $ 22,171 million in cash and cash equivalents with $ 123,173 million in long-term debt, compared to respective totals of $ 2,594 million and $ 100,712 million for the same period of the previous year.

Orientation

Verizon offered bullish guidance for 2021 based on resilient earnings performance and projected trends. The company currently expects adjusted earnings in the range of $ 5.00 to $ 5.15 per share. While revenues from services and others are expected to increase by more than 2%, revenues from wireless services are expected to increase by more than 3%. Capital spending will likely be $ 17.5 billion to $ 18.5 billion.

Rank Zacks and actions to consider

Verizon currently holds a Zacks # 3 (Hold) rank. Some better ranked stocks in the sector Gogo Inc. GO GO, Qualcomm Incorporated QCOM and Sonim Technologies, Inc. SONM, each wearing a Zacks # 2 rank (Purchase). You can see The full list of current Zacks # 1 Rank (Strong Buy) stocks here.

Gogo has a surprise results over the last four quarters of 23.9% on average.

Qualcomm expects long-term profit growth of 19.6%. It delivered a positive surprise of 17.3%, on average, over the past four quarters.

Sonim has a surprise of 2.2% on average on the results of the last four quarters.

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