Key takeaways
- The telecom giant delivered 184,000 postpaid phone network add-ons during the second quarter, beating Wall Street expectations of 106,000.
- Total revenue fell 0.7% year over year to $34.3 billion, below consensus expectations of $35.2 billion.
- Adjusted earnings per share came to $1.30, beating analysts’ estimates of $1.28
- Net income decreased to US$3.95 billion, mainly due to US$1.8 billion in pre-tax special charges, with significant costs related to the newly formed BT Group partnership.
- The company upgraded its full-year adjusted EPS forecast to $4.99-$5.04 and increased its mobility and broadband services revenue growth forecast to 2.5%-3%.
Verizon (VZ) shares rose 4% during Friday’s pre-market session following the telecommunications company’s second-quarter earnings report, which showed subscriber growth accelerating under CEO Dan Schulman’s leadership.
The wireless carrier reported 184,000 postpaid phone net additions during the quarter, significantly exceeding FactSet’s forecast of 106,000. This performance represents a significant turnaround from the same period last year when the company experienced net losses in the category.
Total quarterly revenue was $34.3 billion, representing a 0.7% decline from the previous year and missing Street expectations of $35.2 billion. Management attributed this shortage to a decline in equipment revenues of approximately 20%, as consumers kept their devices for long periods and the company reduced device support.
However, this lack of revenue may not indicate an underlying problem for investors in the wireless sector. The decline stems from a deliberate shift away from expensive promotional campaigns, a strategic initiative that Shulman emphasized as a top priority upon taking over as CEO last October.
Adjusted earnings per share were $1.30, up from $1.22 in the year-ago period and beating the analyst consensus of $1.28.
Reported net income fell significantly to $3.95 billion, or 92 cents per share, compared to $5.12 billion, or $1.18 per share, in the same quarter a year earlier. This decline was caused by $1.8 billion in pre-tax special charges.
The BT partnership creates a one-off fee
The bulk of these charges was a $746 million loss associated with Verizon’s international operations agreement with BT Group. Under the arrangement announced last month, the two telecom companies have combined their global operations into a unified joint venture, enabling each company to focus more resources in their own local markets.
Verizon It also reported the addition of 348,000 net broadband connections during the quarter. Combined mobility and broadband revenues rose 2.8% to $23.4 billion.
Management expects this growth rate to “close” to 3% during the third quarter and accelerate to about 4% in the fourth quarter.
The company increases its full-year forecast
The company raised its full-year adjusted EPS guidance to $4.99-$5.04, up from the previous range of $4.95-$4.99. The full-year retail postpaid phone net additions target remains unchanged at 875,000 to 1 million.
Verizon also boosted its full-year mobility and broadband revenue growth outlook to 2.5%-3%, compared to the previous range of 2%-3%.
The previous week, management announced plans to cut nearly 3,000 jobs and transfer hundreds of company-owned retail locations to franchise operators. Nearly 500 of these cuts affect corporate-level positions.
Schulman said Verizon has accomplished a “huge change in reducing waste” while at the same time reducing customer acquisition costs. He described the quarterly performance as reflecting the company’s “strongest operating position we have seen in years.”
A recently introduced pricing plan offers unlimited data for $45 per month for existing subscribers, or $30 for new customers switching from competitors — well below the standard $55 price point.
