Quick Look:
- Verizon’s Q2 revenue of $32.8 billion missed expectations, falling short of the anticipated $33.04 billion.
- Added 148,000 wireless postpaid phone subscribers, surpassing the 94,000 expected.
- Adjusted earnings per share fell 5% to $1.15, with total revenue increasing by only 0.6%.
- The stock dropped by 6.2%, reflecting disappointment despite a previous 7% gain in 2023.
In an early Monday announcement, Verizon Communications (VZ) shared its second-quarter results, leaving investors with mixed emotions. While the company’s adjusted earnings aligned with market expectations, its revenue fell short of Wall Street’s forecasts. Consequently, Verizon’s stock took a hit, reflecting the disappointment in other crucial financial metrics.
Subscriber Growth: A Silver Lining
Despite the revenue shortfall, Verizon reported positive news in subscriber growth. The company added 148,000 wireless postpaid phone subscribers, surpassing the anticipated 94,000. Postpaid subscribers are considered valuable as they typically generate higher monthly revenue. However, the consumer unit could have performed better than analysts had hoped, losing 8,000 postpaid phone subscribers. This was offset by a gain of 156,000 business subscribers, indicating a solid performance in the corporate sector.
Financial Performance: Earnings and Revenue
For the quarter ending June 30, Verizon reported adjusted earnings of $1.15 per share, representing a 5% decline from the previous year. The company’s revenue saw a modest increase of 0.6%, reaching $32.8 billion, below the expected $33.04 billion. Wireless service revenue showed a healthy growth of 3.5%, totalling $19.8 billion. Earnings before interest, taxes, depreciation, and amortization (EBITDA) slightly exceeded estimates, coming in at $12.3 billion compared to the forecasted $12.27 billion.
Stock Market Reaction: A Drop Below the Moving Average
Following the earnings report, Verizon’s stock fell by 6.2%, landing close to $39 per share and dropping below its 50-day moving average. This decline underscores investor dissatisfaction with the overall financial performance despite the positive subscriber growth. Before the earnings release, Verizon’s shares showed a 7% increase in 2023, indicating some positive sentiment that the latest results had dampened.
Technical Ratings and Competitive Landscape
Verizon’s stock currently holds a Relative Strength Rating (RSR) of 72 out of 99, per IBD Stock Checkup. While decent, this rating suggests that Verizon has room for improvement in stock performance relative to other companies. In the competitive telecom landscape, AT&T will release its Q2 earnings report on July 24, with its stock gaining nearly 11% in 2024. T-Mobile US (TMUS) will report its earnings on July 31, making the next few weeks crucial for market dynamics within the sector.
Moving Forward: Challenges and Opportunities
Verizon faces several challenges as it moves forward, including meeting revenue expectations and improving its consumer unit performance. However, the company has opportunities to leverage its strong business subscriber growth and continue expanding its wireless service revenue. The mixed Q2 results highlight the need for strategic adjustments to regain investor confidence and drive future growth.
Verizon’s second-quarter earnings report presents a complex picture. While there are positive signs in subscriber growth and wireless service revenue, the shortfall in overall revenue and the stock’s decline indicate areas needing attention. Investors will be closely watching Verizon’s next moves, particularly in addressing these challenges and capitalizing on emerging opportunities in the telecommunications sector.
