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Consumer Segment Traction to Buoy Verizon (VZ) Q4 Earnings

Zacks Equity Research

Verizon Communications Inc. VZ is scheduled to release fourth-quarter 2019 results before the opening bell on Jan 30. In the fourth quarter, the company is likely to have recorded higher year-over-year revenues driven by strength in its Wireless business, which forms an integral part of the Consumer segment that accounts for the lion’s share of total revenues.

Factors at Play

During the quarter, Verizon focused on increasing 5G deployment across select U.S. cities. The telecom behemoth launched 5G Ultra Wideband network in select locations of Miami, FL and Greensboro, NC among others to bring the tally of 5G mobility service cities to 31, thereby achieving its target of 5G service in more than 30 cities by the end of 2019. This is expected to be reflected in fourth-quarter results.

In the quarter, Verizon’s 5G Lab augmented the GPU-based cloud services capabilities by developing a set of revolutionary mobility solutions, namely virtual reality, mixed reality, augmented reality and cinematic reality. The company developed a prototype using GPU slicing and virtualization that will support any GPU-based service, increasing the ability for multiple user-loads and tenants. This is likely to provide a platform for developing ultra-low-latency cloud gaming, thereby enabling the development of scalable, low cost and highly powerful mobile devices. This, in turn, is likely to have translated into incremental revenues for the Consumer segment in the quarter.

The Zacks Consensus Estimate for operating revenues for the segment stands at $24,074 million, representing an improvement of 6% from the prior-quarter reported number. Continued investments to ramp up a solid fiber-optic network is likely to have affected margins. The consensus estimate for operating income is pegged at $6,969 million, indicating a decline from $7,489 million reported in the previous quarter.

Overall Expectations

The Zacks Consensus Estimate for total revenues for the company stands at $34,520 million. It generated revenues of $34,281 million in the prior-year quarter. The consensus estimate for earnings is currently pegged at $1.15 per share, indicating a rise from $1.12 reported in the year-earlier quarter. (Read More: Can Solid Wireless Business Aid Verizon’s Q4 Earnings?)

Earnings Whispers

Our proven model predicts an earnings beat for Verizon this time around. 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 perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.32%. 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 and EPS Surprise

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

Zacks Rank: Verizon has a Zacks Rank #3.

Other Stocks to Consider

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

Arista Networks, Inc. ANET is set to release quarterly numbers on Feb 13. It has an Earnings ESP of +2.72% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Viavi Solutions Inc. VIAV is +1.06% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Feb 4.

The Earnings ESP for Altice USA, Inc. ATUS is +11.11% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Feb 12.

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