Verizon’s First Quarter Highlights
– Consolidated: $1.06 in earnings per share, compared with $1.02 per share in 1Q 2015.
– Wireless: 640,000 retail postpaid net additions; continued low 0.96 percent retail postpaid churn.
– Wireline: 5.0 percent Fios revenue growth; 98,000 Fios internet and 36,000 Fios video net additions.
In the report, Chairman and CEO Lowell McAdam said:
“Verizon’s strong first-quarter results demonstrate our capacity to compete effectively, while executing on our plan of continued network leadership and seeding new growth markets in mobile video and the Internet of Things.”
Verizon Wireless segment revenues of $22 billion accounted for 68.4% of the company revenues in the first quarter of 2016, and the total wireless revenue declined 1.5% year-over-year.
However, what is most encouraging, in my opinion, is the margin expansion. Segment EBITDA margin increased to 46.2% in the recent quarter from 38.4% in the prior quarter and 44.8% in the same quarter a year ago.
Source: 1Q 2016 Presentation
Verizon’s Outlook & Growth
Management reaffirmed its expectations that 2016 earnings will be comparable to 2015’s level. This is due to pressures from the sale of high-margin wireline operations to Frontier Communications, the ongoing shift of the wireless customer base to device payment plans and from higher capital spending on the ramping up of new growth projects.
Verizon Communications Inc. (NYSE:VZ) also indicated that given the status of labor contract negotiations, there is expected to be pressure on second-quarter earnings due to the timing of cost reductions.
In my view, Verizon is well positioned for continued growth.
The company remains committed to consistently investing in its networks for the future. Its 2015 investments have positioned it for growth and allow it to maintain its network leadership position.
What’s more, to maintain network superiority, Verizon announced on February 22, that it has signed an agreement to purchase XO Communications’ fiber-optic network business for approximately $1.8 billion. According to Verizon, its ownership of XO’s fiber-based IP (Internet Protocol) and Ethernet networks will help better serve enterprise and wholesale customers. Also, acquired fiber facilities will help Verizon continue to densify its cell network. The transaction is subject to customary regulatory approvals and is expected to close in the first half of 2017. Verizon expects to receive several financial benefits from the deal, including a step-up by the assets as well as operating and capital expense savings. The net present value of the operational synergies is expected to be more than $1.5 billion.
