Verizon Third Quarter Earnings, Anything to Write Home About?

Oct 26
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Verizon (NYSE:VZ) held their earnings call today which was mostly inline with analyst expectations beating on earnings by $0.01 for an earnings per share (EPS) of $1.25 on quarterly revenue of $32.894 billion which also was above the analyst estimates of $32.74 billion. The company was flat in trading throughout the day as there were not any unexpected surprises from the earnings call and future guidance was maintained. The company had previously announced a partnership to offer free to its customers a 12-month subscription to Disney+ for qualifying customers. The company noted that it had added 239,000 new customers this quarter which was an improvement from last year which saw only 112,000 customers added in the same timeframe.  The new customer adds included 193,000 retail postpaid net additions which are the top tier customers for the wireless business. The wireless giant saw a postpaid churn of 1.05% which is typical of the company and signifies the percent of users who dropped service over the time period. 

Capital expenditures (Capex) for the company totaled $12.3 billion through the third quarter of 2019.  The CAPEX spending was used to support the build-out of Verizon’s 5G Ultra Wideband network and to also support the growth of data and video traffic on the company’s current LTE network.  The company expects to spend up to $18 billion for the full year in CAPEX to support the launch of 5G. They had also committed in 2018 to achieve $10 billion in cumulative cash savings by 2021 and have so far managed to yield a cash saving of $4.6 billion as of the third quarter of 2019. 

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"Verizon continued its momentum in the third quarter by driving strong wireless volumes in both our Consumer and Business segments, while delivering solid financial results, highlighted by continued wireless service revenue growth, increased cash flow, and EPS growth," said Chairman and CEO Hans Vestberg. "We are focused on our 5G rollout strategy, looking to deploy next-generation networks while enhancing our industry-leading 4G LTE network. Going into the fourth quarter, we are energized by the strong performance of the business and we are confident in our strategy to drive value for our customers and growth for our shareholders."

Verizon has continued to engage in conservative and well thought out initiates compared to the excitement and drama of its competitors.  It has not recently engaged in any historic mergers, it has not made any large corporate purchases to try to move into new sectors and it has fended of lower-priced competitors and continued to add subscribers.  It has made smaller investments and purchases designed to strategically enhance the future of the business. It is clearly the market dominator in its sector and for the most part, has continued to focus on its core business and engage in competitive deals with other content creation companies to provide services rather than try to buy out content creators to provide services to their customers.  So far this has helped them avoid taking on excessive levels of debt and held margins steady. We’ll see if this continues to be a winning strategy going forward for the top dog of telecommunications. 

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