S&P uses inconsistent methodology in forecasting share prices for T and VZ and for the next 12 months. In case of T, S&P uses Enterprise Value/EBITDA multiplier while in case of VZ, they use a p/e multiplier of 16 based on estimated forward earnings. Talk about fudged numbers and poor methodology is issuing a set of reports. I care less which method they use, but at a minimum, they should make the set consistent so that what they publish carries some credibility.
Here is my points:
1) S&P says, 4.6% yield makes the VZ stock attractive and goes on to further say this is based on the current 10 yield bond yield. Now then, why not bring the T's stock yield of over 5 percent to the forefront?
2) VZ has some huge problems ahead of it whether we go by periodic payments to VOD or outright buyout of their share. S&P conveniently ignores mentioning this important factor. Working the EBITDA for VZ could take a lifetime with no confidence in the resulting conclusion.
3) VZ is expected to grow earnings by 8 percent compared to 7 for T.
4) Same credit rating but VZ stands on a shaky ground mainly because when they have to cuff up $22.5B to buy VOD's share of assets held and used by the company.
In summary, we should ignore the claims made in the reports in totality with respect to VZ. By far, T makes a much better buy.