Verizon Communications, Inc. (NYSE: $VZ) is a holding company that delivers communication, information and entertainment services. Established in 1983 and headquartered in New York, the company offers data, voice and video services and solutions via its networks and platforms. Its services are available worldwide with a core focus on the US.
On Monday, April 22, 2024, Verizon Communications released its Q124 Earnings for the quarter ended March 2024 to a negative market reaction.
Key Financial Highlights
For the first quarter of 2024, Verizon reported total operating revenue of $32.98 billion, a 0.2% increase compared to last year. However, this figure missed estimates of $33.33 billion by 1.05%. On the bottom line, Verizon’s EPS came in at $1.15, beating the consensus estimate of $1.12 by 2.68% but lower than the $1.20 EPS reported in Q1 2023.
Verizon’s Consumer segment, which includes its wireless, Fios Internet and traditional video services, generated $25.06 billion in revenue, up 0.8% year-over-year but below the average analyst estimate of $25.41 billion by six analysts. Wireless service revenue rose 2.9% to $19 billion, driven by pricing actions and higher-value customer additions.
However, the company saw a decline in wireless equipment revenue, which fell 8% to $4.49 billion, reflecting a challenging macroeconomic environment and lower postpaid phone upgrades. Verizon added 49,000 new Fios Internet subscribers during the quarter, benefiting from the growing demand for reliable fiber-optic broadband services. On the other hand, the company lost 68,000 Fios Video customers as consumers continued to shift away from traditional linear TV offerings.
Verizon’s Business segment, which caters to enterprise and government customers, reported revenue of $7.38 billion, down 1.6% from the prior year and slightly below the consensus estimate of $7.40 billion. The segment’s performance was impacted by lower wireline and wireless equipment revenue, partially offset by growth in wireless service revenue.
Despite the revenue decline, the Business segment added 178,000 new wireless retail postpaid subscribers, including 90,000 postpaid phone net additions. However, operating income for the segment fell to $399 million from $551 million a year earlier, reflecting a challenging environment and a decline in high-margin wireline revenue.
Key Metrics and Subscriber Growth
Verizon’s earnings release provided insights into several key metrics closely watched by analysts and investors. The company reported a wireless retail postpaid churn rate of 1%, lower than the 1.1% estimated by analysts, indicating improved customer retention. Also, Verizon added 253,000 new postpaid subscribers during the quarter, with fixed wireless broadband net additions of 354,000.
Financial Strength and FY24 Guidance
Despite the mixed performance, Verizon’s financial position remains solid. The company generated $7.08 billion in net cash from operating activities during the quarter and reported a free cash flow of $2.71 billion. As of March 31, 2024, Verizon had $2.37 million in cash and cash equivalents, with a long-term debt of $136.10 million.
For fiscal 2024, Verizon reiterated its guidance, expecting wireless service revenue growth of 2% to 3.5%, adjusted EBITDA growth of 1% to 3% and adjusted EPS of $4.50 to $4.70. The company also plans to invest between $17 billion and $17.5 billion in capital expenditures to strengthen its network and support future growth initiatives.
Verizon Communications Stock Performance
Verizon Communications shares (VZ) were down 3.85% to $38.93 on Monday, April 22, as of 02:15 PM EDT following the revenue miss. They have now fallen below the 50-day moving average of $40.50 but above the 200 DMA of $36.79. The decline came after Verizon gained over 7% in 2024, recovering from a 4% decline in the previous year.
Analyst Perspectives and Outlook
Analysts had mixed reactions to Verizon’s Q1 earnings. While some praised the company’s ability to maintain subscriber growth and improve customer retention, others expressed concerns over the declining wireline and equipment revenue streams.
Looking ahead, Verizon’s management remains optimistic about the company’s prospects. In a statement, CEO Hans Vestberg emphasized the company’s focus on expanding its 5G network and developing new products and services to drive future growth.
As the telecommunications industry continues to evolve, its ability to capitalize on emerging trends will be crucial for its future performance. Investors and analysts will closely monitor the company’s execution and strategic initiatives in the coming quarters.
Should You Consider Buying Verizon Communications in 2024?
Despite typically higher pricing than rivals AT&T and T-Mobile, Verizon’s ability to retain and attract subscribers through innovative offerings has helped it retain a large market share.
Its Q1 results highlight both opportunities and challenges. While the company is successfully raising prices and bundling services to drive wireless revenue growth, it continues to lose postpaid phone subscribers to competitors. Verizon’s focus on expanding 5G and developing new products could fuel future growth, but executing these initiatives will be crucial.
The stock could be an attractive option for investors seeking a defensive telecom stock with a solid dividend yield. However, those prioritizing rapid growth may want to look elsewhere until Verizon demonstrates sustained subscriber momentum and a clear path to reviving its consumer business. Therefore, carefully evaluating Verizon’s strategic moves and competitive positioning is crucial.
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