Verizon's 4th-Quarter Earnings Blow Past Projections
- By Mayank Marwah
Verizon Communications Inc. (NYSE:VZ) released its fourth-quarter results before the opening bell on Jan 26. The telecommunications giant reported better-than-expected earnings and revenue, courtesy of robust growth in wireless business and Verizon media.
By the numbers
The New York-based company recorded earnings of $1.21 per share, which beat the $1.13 per share reported in the year-ago period. Operating revenue stood at $34.69 billion, down 0.2% year over year. Analysts had projected earnings of $1.17 per share on $34.45 billion in revenue.
The revenue decline was primarily due to a decline in wireless equipment revenue resulting from low activation levels. Additionally, a fall in demand for legacy wireline products adversely affected the metric.
Reflecting on 2020 and the latest quarter, Chairman and CEO Hans Vestberg said:
"2020 was marked by transformational change, including the launch of our 5G nationwide network. We witnessed a mass shift toward virtual collaboration, touchless retail and delivery, remote work, distance learning, and telemedicine. We continued to execute our multi-use network strategy; we were recognized by RootMetrics as the best overall wireless provider, undefeated in all categories; and we continue to be the partner of choice for the world's most innovative brands. Today, we are excited to lead technological advances beyond mobile devices, and create new opportunities for growth across multiple industries."
Performance of consumer and business divisions
Revenue in the consumer business amounted to $23.9 billion, which reflected a 1.2% decline from the prior-year quarter. Verizon recorded 357,000 wireless retail postpaid net additions. Service revenue swelled 1.2% to $13.6 billion courtesy of a shift to high-priced plans and a rise in connections per count. The quarterly retail postpaid churn rate was 0.96%, while the retail postpaid phone churn was 0.76%. The company added a net of 92,000 Fios internet connections as more people did work from home. Operating income in the segment amounted to $7.1 billion, up 2.7% on a year-over-year basis.
In the business segment, the company posted revenue of $8.1 billion, down 0.3% from the prior-year quarter. The decline in demand for legacy products more than offset robust growth of VPN services as well as high-quality mobility products. The retail postpaid churn rate was 1.19%. Wireless retail postpaid net additions totalled 346,000. The company further broke down the numbers into 116,000 phone net additions, 116,000 tablet net additions and 114,000 other connected device additions. Segment operating income came in at $950 million, which reflected a 42.6% growth year-over-year.
Outlook
The commercial launch of the 5G Ultra Wideband network across more markets in the U.S. is expected to boost Verizon's overall results in the upcoming quarters, given that the company has one of the most productive wireless networks in the United States.
For full-year 2021, Verizon anticipates adjusted earnings per share to lie in the range of $5 to $5.15. The company did not provide consolidated revenue guidance. However, the company did mention that its service and other revenue is expected to rise by at least 2%. Capital spending is projected to be around $17.5 billion to $18.5 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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This article first appeared on GuruFocus.
