Verizon Communications Inc. (NYSE: VZ) reported some impressive earnings, revenue and subscriber numbers on Tuesday morning, but VZ stock merely wavered, trading within a tight range. Analysts say Verizon’s solid second-quarter and updated guidance may not be as bullish as they appear.
Verizon reported second-quarter adjusted earnings per share of $1.20 on operating revenue of $32.2 billion. Both numbers topped consensus analyst estimates of $1.14 and $31.7 billion, respectively.
The telecom leader also reported 398,000 net monthly subscriber additions, well ahead of Wall Street expectations of 352,000 net additions.
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It wasn’t all good, however: VZ lost 37,000 Fios video subscribers in the second quarter but gained 43,000 Fios internet customers.
“Verizon is extremely well-positioned for the future,” CEO Lowell McAdam says in a statement. “Our financial and operating results for the first half of 2018 were strong, as evidenced by service revenue, earnings and operating cash flow growth delivered in a highly competitive marketplace.”
Looking ahead, Verizon guided for slightly better full-year revenue growth than it did last quarter. VZ is now calling for low-to-mid single-digit revenue growth, up from “the low-single-digit” range it previously expected. Verizon said positive equipment revenue trends are the primary reason for the improved outlook.
Verizon said it is expecting full-year capital expenditures to be closer to the lower end of its previous guidance range of between $17 billion and $17.8 billion. It also expects its full-year tax rate to be on the low end of its guidance range of between 24 and 26 percent.
Verizon is still expecting low-single digit percentage growth in EPS in 2018.
Bank of America analyst David Barden says lower-than-expected capex and tax rate guidance makes VZ stock a compelling value play for long-term investors.
“It appears the beat is primarily related to the tax rate (23 percent vs. our 25 percent) as [earnings before interest, taxes, depreciation and amortization] was in-line,” Barden says.
With AT&T ( T) set to report earnings on Tuesday afternoon, Barden says other U.S. carriers are watching Verizon’s subscriber numbers closely.
“Postpaid phone net adds were a surprise to the upside which extends the debate on whether the post-paid phone net add market can expand enough to accommodate the entry of cable players while sustaining incumbents.”
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Bank of America has a “buy” rating and $58 price target for VZ stock.
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Verizon Communications Inc. (VZ) Stock Muted After Earnings Beat originally appeared on usnews.com
