Can Flat Revenue Trajectory Aid Verizon's (VZ) Q2 Earnings?

Verizon Communications Inc. VZ is scheduled to report second-quarter 2022 results before the opening bell on Jul 22. In the last reported quarter, the telecom giant met the Zacks Consensus Estimate, delivering a surprise of 2.9% in the trailing four quarters.

The company is expected to have recorded relatively flat aggregate revenues year over year, as the positive momentum in its core wireless business is likely to have been offset by the challenging macroeconomic environment.

Factors at Play

During the second quarter, Verizon deployed the C-Band spectrum in a phased manner to further expand its 5G coverage and delayed deployment near airports as part of the FAA deal. The company is witnessing significant 5G adoption and fixed wireless broadband momentum while increasing demand for premium mobility and broadband offerings instill optimism. Verizon hiked its wireless prices during the quarter – the first in about two years to offset the rising inflationary pressures. The company informed consumers that the administrative charges for each voice line will be raised by $1.35 from June onward. For business customers, Verizon decided to bring in an “economic adjustment charge” from Jun 16, 2022, which is likely to increase mobile data bills by $2.20 a month and basic service plans by about 98 cents. This is likely to get reflected in the upcoming quarterly results.

Verizon collaborated with Sawatch Labs to help fleet operators seamlessly migrate to electric vehicles. Verizon Connect Reveal, the fleet management software platform from the carrier, offers customizable GPS fleet management software to effectively track vehicle locations and driver behavior like speeding, idling and harsh driving to improve fleet operations. By migrating to 4G and cloud networks and utilizing Sawatch Labs analytics, fleet operators will be able to identify accurate location data for faster-routing facilities by deploying the closest vehicle to customers. With the Verizon Connect Reveal app, which is exclusively available in the 4G network, customers will benefit from a new High-Fidelity Tracking feature. This asset tracking software offers a three-fold jump in the frequency of real-time vehicle location updates on the Live Map, thereby providing higher visibility of project-critical equipment. These developments are likely to have had a positive impact on Verizon’s performance.

During the quarter, Verizon collaborated with Visionable to accelerate the evolution of healthcare using its private 5G and AI-driven secure networking. According to the terms of the collaboration, the technology-led center to be built will showcase the benefits of next-generation connectivity and collaboration with various healthcare environments. The center will bring together professionals in a hub to see and stimulate technology concepts to enable the creation of future innovative solutions. The center will also aid healthcare professionals in accessing data, collaborating and sharing resources. These initiatives are likely to have translated into incremental revenues in the quarter.

In the second quarter, Verizon announced that Age of Learning and Perlego will partner with its +play platform, broadening the depth of the platform’s offerings. +play, a ground-breaking platform, is a unique digital hub designed to centralize subscription services at no additional cost. It is a content hub, providing customers with exclusive deals and offerings for various content services. +play is a natural extension of Verizon’s core strengths. The premium content and entertainment relationships have made this platform one of the largest and most successful direct-to-consumer platforms in the country. Additionally, it builds on Verizon’s strategy to accelerate 5G adoption through premium offerings. However, adverse foreign currency translations and high operating costs for 5G deployments are likely to have led to soft margins in the quarter. The infrastructure investments are expected to have weighed on the margins.

For the June quarter, the Zacks Consensus Estimate for revenues is pegged at $33,775 million. It reported revenues of $33,764 million in the year-ago quarter. The consensus estimate for adjusted earnings per share stands at $1.34, which suggests a decline from the year-ago tally of $1.37.

Earnings Whispers

Our proven model does not predict an earnings beat for Verizon for the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.71%, with the former pegged at $1.33 and the latter at $1.34. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Verizon Communications Inc. Price and EPS Surprise

Verizon Communications Inc. price-eps-surprise | Verizon Communications Inc. Quote

Zacks Rank: Verizon has a Zacks Rank #3.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Keysight Technologies, Inc. KEYS is set to release quarterly numbers on Aug 17. It has an Earnings ESP of +1.23% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Qorvo Inc. QRVO is +0.41% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 3.

The Earnings ESP for Apple Inc. AAPL is +0.88% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 28.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.