Verizon earnings preview: after running out of losses, can we now build real momentum?

Verizon Communications Inc. already reported that it reversed negative subscriber trends in the fourth quarter, but there’s more to tell about the company’s history.

The wireless giant is due to release fourth-quarter results Tuesday morning amid continued skepticism on Wall Street about the company’s ability to make more dramatic changes to its business. Verizon VZ,
-0.93%
may have managed to stop the bleeding after three consecutive quarters of declining subscribers in its consumer postpaid business, but analysts who are largely neutral on the stock have doubts about Verizon’s ability to gain real momentum in the competitive wireless market.

Read more: What’s next for Verizon? After a gloomy 2022, it’s time to hear the recovery plan.

Here’s what to expect ahead of Verizon’s report, which is due out before Tuesday’s open.

What to expect

Income: Analysts monitored by FactSet expect the company to post adjusted earnings per share of $1.19 for the fourth quarter, up from $1.31 a year earlier. According to Estimize, which collects forecasts from hedge funds, academics and other organizations, the average valuation is $1.22 per share.

Income: Analysts polled by FactSet expect Verizon to post $35.09 billion in revenue for the latest quarter, up from $34.10 billion a year earlier. Those who contribute to Estimize expect an average of $35.16 billion.

Stock movement: Verizon’s stock has tumbled after each of the company’s last four earnings reports. Shares are up 12% in the last three months, although they have fallen 25% in 12 months.

Of the 28 analysts tracked by FactSet who cover Verizon stock, seven have a buy rating, 19 have a hold rating, and two have a sell rating, with an average price target of $44.34.

What to look out for

While Verizon CEO Hans Westberg has already teased that the company hit its goal of positive consumer subscriber growth in the fourth quarter, the company has yet to reveal the extent of that growth.

Evercore ISI analysts led by Vijay Jayant expect 50,000 postpaid phone networks to enter the company’s consumer business, up from 336,000 in the fourth quarter of 2021. relative to a year ago.

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The company’s outlook for fiscal year 2023 will also be of key interest.

“We expect Verizon’s 2023 outlook to be impacted by the same competitive and macro factors that led management to lower its 2022 outlook in July – cost inflation, competition, increased advertising subsidies, higher interest rates and a mix of growth business and consumer clients. Deutsche Bank analyst Brian Kraft wrote. In addition, he notes the potential for “slower growth in demand for 5G mobile edge computing services and higher taxes on cash (perhaps depending on management’s assumptions underlying the FCF). [free-cash-flow] management).”

However, such pressures “seem to be reflected in the consensus estimates already,” Kraft added.

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Verizon’s narrative continues to generate skepticism on Wall Street.

“We think the short-term setup will be negative for the higher-valued VZ.
Historical averages and fundamentals are struggling to post robust gains,” wrote KeyBanc Capital Markets analyst Brandon Nispel, who ranks stocks by sector. “We are below consensus and see headwinds for earnings per share. [earnings-per-share] growth that could cause a short-term negative reaction to the stock.”

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