Key Takeaways
- The telecom giant secured 184,000 postpaid phone net additions during the second quarter, significantly exceeding the analyst projection of 106,000
- Quarterly revenue declined 0.7% to reach $34.3 billion, falling short of the $35.2 billion consensus forecast
- Adjusted earnings per share reached $1.30, surpassing the anticipated $1.28
- Net income decreased to $3.95 billion as $1.8 billion in pretax special charges hit results, primarily from expenses related to the BT Group partnership
- The company increased its full-year adjusted EPS forecast to $4.99ā$5.04 range; projected mobility and broadband service revenue growth upgraded to 2.5%ā3%
Shares of Verizon (VZ) climbed 4% during premarket hours on Friday following second-quarter earnings that demonstrated strengthening subscriber trends under CEO Dan Schulman’s leadership.
Verizon Communications Inc., VZ
The telecommunications company reported adding 184,000 postpaid phone net subscribers during the period. This figure substantially exceeded the FactSet consensus projection of 106,000. Notably, Verizon experienced a net decline in this metric during the same quarter last year.
Total revenue registered at $34.3 billion, representing a 0.7% year-over-year decrease and missing the analyst consensus of $35.2 billion. Management attributed this shortfall to an approximately 20% plunge in equipment revenue, driven by consumers retaining devices longer and the company reducing device subsidy programs.
However, this revenue shortfall shouldn’t alarm wireless sector investors. The decline represents an intentional strategic pivot away from expensive promotional campaigns, which Schulman identified as a key objective upon assuming the CEO position last October.
Adjusted earnings per share came in at $1.30, climbing from $1.22 in the prior-year period and exceeding the $1.28 consensus.
Reported net income dropped considerably to $3.95 billion, or 92 cents per share, compared with $5.12 billion, or $1.18 per share, in the year-ago quarter. This decline resulted from $1.8 billion in pretax special charges.
BT Partnership Impacts Bottom Line
The largest component of those charges was a $746 million loss associated with Verizon’s transaction with BT Group. Last month, the two telecommunications firms announced plans to merge their international business operations into a joint venture, enabling both companies to concentrate resources on their domestic markets.
Verizon also reported adding 348,000 net broadband subscribers during the quarter. Revenue from mobility and broadband services increased 2.8% to total $23.4 billion.
Management indicated this growth rate should “approach” 3% during the third quarter and accelerate to approximately 4% in the fourth quarter.
Company Increases Outlook
The full-year adjusted EPS guidance received an upward revision to $4.99ā$5.04, increased from the previous $4.95ā$4.99 range. The company maintained its full-year retail postpaid phone net additions guidance between 875,000 and one million.
Additionally, Verizon elevated its full-year mobility and broadband service revenue growth projection to 2.5%ā3%, up from the earlier 2%ā3% range.
The previous week, management announced plans to eliminate approximately 3,000 positions and transfer hundreds of retail locations to franchise operators. Roughly 500 of those reductions affect corporate staff.
Schulman commented that Verizon has accomplished “a step-change in churn reduction” while simultaneously decreasing customer acquisition expenses. He characterized the quarterly performance as reflecting the company’s “strongest operating position we have seen in years.”
A newly introduced plan rolled out last month provides unlimited data for $45 monthly for existing subscribers, or $30 for customers switching from competitors ā below the standard $55 entry price point.
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