Verizon Communications Inc. VZ is scheduled to report fourth-quarter 2024 earnings on Jan. 24. The Zacks Consensus Estimate for sales and earnings is pegged at $35.4 billion and $1.09 per share, respectively. Earnings estimates for VZ have declined marginally from $4.60 per share to $4.59 for 2024 and from $4.71 per share to $4.70 for 2025 over the past 30 days.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
VZ Estimate Trend
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Earnings Surprise History
The communication services provider has had a modest earnings surprise history in the trailing four quarters, exceeding earnings expectations on each occasion. It delivered a four-quarter earnings surprise of 1.34%, on average. In the last reported quarter, the company pulled off an earnings surprise of 0.85%.
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Earnings Whispers
Our proven model does not predict an earnings beat for Verizon for the fourth 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. That is not the case here.
Verizon currently has an ESP of -0.40% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Upcoming Results
Verizon is offering various mix-and-match pricing in wireless and home broadband plans, which have historically led to increased adoption of 5G devices and premium unlimited plans. In addition to various bundle plans for varied streaming services, it offers customers greater control and flexibility over their preferred content selections, allowing them to pay only for what they want.
During the to-be-reported quarter, Verizon expanded its high-speed fiber broadband connection in key places to foster digital inclusion and bridge the urban-rural digital divide. It also completed a trial across a live metro network to test the efficacy of its fiber infrastructure for handling huge AI (artificial intelligence) workloads. The trial was accomplished using Ciena Corporation’s WaveLogic 6 Extreme (WL6e) coherent optical solution and passed through nine reconfigurable optical add-drop multiplexers (ROADMs).
Leveraging Ciena’s optical solution, Verizon was able to transfer 1.6 Tb/s of data in a live fiber network over a 118 km Boston metro route on a single-carrier wavelength, validating the performance of WL6e in a flexible, dense ROADM environment. This highlighted the fiber network’s prowess in swiftly transferring huge data in real-time, which is the cornerstone of Generative AI. This is likely to have translated into healthy customer additions and higher revenues from the Consumer segment.
The Zacks Consensus Estimate for revenues from the Consumer segment is pegged at $27.29 billion, while our model projects revenues of $27.17 billion.
During the reported quarter, Verizon collaborated with NVIDIA Corporation to power real-time Generative AI applications over its 5G private network. Leveraging Verizon's private Mobile Edge Compute technology and NVIDIA’s AI capabilities, the collaboration aimed to drive digital transformation and fuel innovation across business enterprises worldwide.
In the fourth quarter, VZ deployed an Open RAN-based Distributed Antenna System (DAS) at the Austin Convention Center and the University of Texas to deliver reliable 5G services. This marks the first commercial deployment of the DAS systems with multi-vendor interoperability using O-RAN interfaces in the Verizon network. These are likely to have translated into incremental revenues in the Business segment.
The Zacks Consensus Estimate for revenues from the Business segment is pegged at $7.52 billion, while our model projects revenues of $7.53 billion.
However, adverse foreign currency translations, infrastructure investments and high operating costs for 5G deployments are likely to have led to soft margins in the quarter. Moreover, the promotional offers and lucrative discounts are expected to have weighed on margins. In addition, the company’s wireline division is struggling with persistent losses in access lines owing to competitive pressure from the voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data and video) offerings by cable companies.
Verizon also recorded high capital expenditures for the launch and continued build-out of its 5G Ultra-Wideband network, deployment of significant fiber assets across the country and Intelligent Edge Network architecture upgrades.
Price Performance
Over the past year, VZ has declined 2% against the industry’s growth of 19.8%. It has also underperformed its peers like AT&T Inc. T and T-Mobile US Inc. TMUS over this period.
One-Year VZ Stock Price Performance
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Key Valuation Metric
From a valuation standpoint, Verizon appears attractive relative to the industry and is trading below its mean. Going by the price/earnings ratio, the company shares currently trade at 8.23 forward earnings, lower than 12.47 for the industry and the stock’s mean of 9.22.
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Investment Considerations
By investing steadily in fiber infrastructure and pioneering new technologies, Verizon is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid subscriber growth, higher average revenue per user and increased broadband and fiber penetration.
However, high capital expenditures due to the continued expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network and the deployment of the fiber infrastructure have eroded margins. An ongoing shift from traditional linear video to over-the-top offerings, along with a competitive and almost saturated U.S. wireless market, is further likely to weigh on the company’s revenues in the future.
End Note
Verizon seems to be treading in the middle of the road, and new investors could be better off if they trade with caution. It appears that the recent initiatives have mostly fallen flat as it plays a catch-up game with its rivals. With declining earnings estimates, the stock is witnessing a negative investor perception. Consequently, it might not be a prudent investment decision to bet on the stock at the moment.
However, a single quarter’s results are not so important for long-term stakeholders and investors already owning the stock could stay put. In addition, an attractive valuation and focus on the deployment of a cloud-native, container-based, virtualized architecture for higher flexibility, scalability and cost efficiency across its network will likely reap long-term benefits.
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