Verizon Communications Inc. (NYSE: $VZ) is a communications services company that 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.
Verizon Earnings Report
The company released its Q423 earnings report on January 23, 2024 before markets opened. According to the report, Verizon had a loss of $2.57 billion in Q4 or a diluted EPS of -$0.64, a huge drop from the $1.56 reported In Q422.
The company stated that the loss was occasioned by a $7.8 billion expense on special items. It had incurred a one-time goodwill impairment charge of $5.8 billion. Additionally, it had incurred nearly $992 million in mark-to-market adjustments to its employee benefits programs and pension, amongst other costs. Excluding the special items, its adjusted EPS for the quarter was $1.19. Full-year adjusted EPS fell 9.1% to $4.71, excluding the special items, compared to the $5.28 reported in FY22.
Its reported revenue of $35.1 billion was above analysts’ estimates. However, it was 0.3% lower than the $35.25 billion reported in the same quarter last year. For the quarter, analysts had projected a contraction in revenue and EPS to $34.6 billion and $1.06 compared to the same time the previous year.
Verizon also reported a 2.1% decrease in full-year revenue to $133.974 billion, compared to the $136.835 reported in FY22. Total wireless services revenue was up 3.2% to reach $76.73 billion.
Positive Subscriber Numbers
Despite the drop in FY revenue, Verizon had a lot of positive news to report regarding subscriber numbers. Its net additions for Fixed Wireless were up over 31% for FY23.
The wireless postpaid net additions for FY23 grew 26% compared to last year. According to Verizon, total wireless postpaid phone subscriptions grew 449,000 in Q423, compared to the 217,000 reported at the same time last year. Additionally, consumer phone gross additions in Q4 grew nearly 17% Y/Y, making it the best quarterly performance for Verizon in four years.
The company’s services are typically higher priced than rivals. However, the company has seen subscriber numbers rise due to its flexible “myPlan” offering. Since it launched in May 2023, it has earned Verizon 13.1 million new subscribers. To make the offering more attractive, Verizon offers subscriptions to Max and Netflix.
The rise in subscriber numbers and price hikes implemented in 2023 helped the company achieve a $35.2 billion revenue in Q4, beating analysts’ estimates.
Strong Cash Flow Numbers
Verizon finished Q4 with strong cash flow numbers. It reported $37.5 billion in FY23 cash flow from operations, marking an over $300 million rise from the $37.1 billion reported in FY22. The rise was attributed to a reduction in capital expenditure to $18.8 billion compared to the $23.1 billion reported in FY22. Its free cash flow for FY23 stood at $18.7 billion, a huge increase from the $14.1 billion reported in 2022.
Stock Performance
Verizon (VZ) stock was up 5.75% during early morning trading on January 23, 2024, at 11:11 AM in New York, following the release of the upbeat Q4 numbers. In October 2023, the stock dropped to a 52-week low of $30.14. However, it has been rising steadily since then and is now at $41.85 per share.
The drop in stock price in October came after an interest rate hike by the Fed, with 10-year bond yields rising to 4.78% at the time. Verizon has a massive debt of over $150 billion, which would have had to be refinanced at higher rates. Additionally, rising bond yields meant that VZ stock, which has traditionally been a dividend stock, was less lucrative and carried a comparably higher risk.
Verizon Stock Forecast
Analysts have given VZ stock a consensus hold rating. They have a broad target for the stock, with a high of $49 and a low of $32.15. Their median target for the stock is $42, an increase of around 0.55%.
Should You Buy VZ Stock?
Verizon reported strong cash flow for Q4, and with Fed rate hikes expected to stop in 2024; the future looks great for the stock. It means it can service its huge debt at good rates. The strong subscriber numbers also mean that it could experience revenue growth in the medium term. However, the company did not provide guidance for 2024. Consequently, the hold rating is an accurate representation of the stock’s medium-term performance.
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