Verizon Communications Inc. VZ ended 2020 at a strong point and reported relatively solid results in the fourth quarter. It highlights a disciplined networking strategy for long-term growth coupled with a focused roadmap for technological leadership. Verizon expects strong 5G momentum in 2021, backed by customer-focused business model and diligent execution of business plans.
Net income
On a GAAP basis, net income for the December quarter was $ 4,718 million or $ 1.11 per share compared to $ 5,217 million or $ 1.23 per share in the previous quarter. The decrease from year to year is mainly due to the provision of income tax in the reported quarter compared to the income tax benefit in the previous year. Excluding non-recurring items, non-GAAP net income for the reported quarter was $ 1.21 per share, surpassing the Zacks consensus estimate by 5 cents. For the full year 2020, the company reported a net income (GAAP) of $ 18.348 million or $ 4.30 per share, compared to $ 19.788 million or $ 4.65 per share in 2019 due to COWID-19 wind .
Verizon Communications Inc. Price, consensus and EPS surprise
Verizon Communications Inc. price-consensus-eps-surprise-chart | Verizon Communications Inc. Quote
Income
Quarterly total operating revenue remained near $ 34.692 million year-on-year, as overall growth in wireless services and good performance in Verizon Media were offset by lower revenue for wireless equipment and declines in legal wireless products. The top line reached the consensus estimate of $ 34,444 million. For the full year 2020, total operating income dropped to $ 128,292 million from $ 131,868 million in 2019.
Segment results
Consumer: Total revenue fell 1.2% year-on-year to $ 23.919 million due to a significant drop in wireless equipment revenue due to low activation levels. Service revenue remained flat at $ 16.388 million, while wireless equipment revenue fell 3.8% to $ 5.503 million due to lower customer activity. Other revenue was $ 2,028 million, down 5.4% year-on-year.
Verizon recorded 357,000 wireless retail net additions during the quarter. It consists of 163,000 telephone additions and 81,000 net losses, compensated by 275,000 other connected device additions. The co-payment of smartphone net additions was 284,000, driven by new model launches and gradual reopening of all stores run by the company, with all safety measures. The total retail arrears amount was 0.96%, while the retail retail phone number was 0.76%. The company recorded 92,000 Internet additions from Fios with an increasing work-from-home trend.
Segment operating income improved by 2.7% to $ 7,073 million for an operating margin of 29.6%, compared to 28.4% in the previous quarter. Segment EBITDA increased by 2.9% to $ 9.937 million, reflecting a 41.5% margin compared to 39.9% in the previous quarter.
Business: Segment revenue was low at $ 8.050 million as Verizon responded effectively to the challenges of COVID-19, addressing the increased traffic needs while meeting the demand for connectivity and devices. The company recorded 346,000 wireless retail net additions in retail during the quarter. It consists of 116,000 add-ons for telephone networks, 116,000 add-ons for network tablets and 114,000 other add-ons for connected devices.
The segment’s operating income was $ 950 million compared to $ 666 million in the previous quarter for the respective margins of 11.8% and 8.3%. Segment EBITDA increased by 18.4% to $ 1,981 million for a margin of 24.6% compared to 20.7% in the previous quarter.
Revenue from Verizon Media improved by 11.4% to $ 2.3 billion, driven by strong advertising trends.
Other details
Total operating expenses decreased by 2.2% year-on-year to $ 27.512 million, while operating income increased by 8.1% year-on-year to $ 7.180 million. Adjusted EBITDA was $ 11.724 million for the respective margin of 33.8%.
Cash flow and liquidity
For 2020, Verizon generated $ 41.768 million in net cash from operating activities, compared to $ 35.746 million in 2019, driven by strong business in the framework and lower working capital requirements due to the lower wireless volume. Free cash flow (non-GAAP) was $ 23.6 billion, up 32.4% year-on-year. As of December 31, 2020, the Company had $ 22.171 million in cash and cash equivalents with $ 123.173 million in long-term debt, compared to the respective counts of $ 2,594 million and $ 100.712 million in the previous year.
Guidance
Verizon offered a bullish lead for 2021 based on resilient earnings performance and projected trends. The company currently expects adjusted earnings of $ 5.00 to $ 5.15 per share. While service and other revenue is likely to grow more than 2%, wireless service revenue is expected to grow more than 3%. Capital expenditure is likely to be $ 17.5 billion to $ 18.5 billion.
Zacks’ rank and shares to consider
Verizon currently has a Zacks Rank # 3 (Hold). Some better ranked stocks in the broader industry are Gogo Inc. GO GO, Qualcomm Incorporated QCOM en Sonim Technologies, Inc. SONM, each with a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks # 1 Rank (Strong Buy) shares.
Gogo averaged a four-quarter decline of 23.9%.
Qualcomm has a long-term expectation of earnings growth of 19.6%. It delivered a positive earnings surprise of 17.3% over the next four quarters.
Sonim has a four-quarter decline of an average of 2.2%.
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