Verizon Comes Up Short In Q1 2017 Earnings Report Analysis

Verizon Communications, often ranked the No. 1 U.S. wireless carrier, reported a 20 percent fall in quarterly profit as it lost wireless postpaid subscribers, despite the re-launch of unlimited data plans.

Net income fell to $3.45 billion, or $0.84 per share, in the first quarter ended March 31, from $4.31 billion, or $1.06 per share, a year earlier. Verizon said it lost 307,000 retail postpaid subscribers on a net basis in the first quarter although analysts were expecting net additions of 222,000, according to market research firm FactSet StreetAccount.

Analysts see Verizon as struggling to fend off smaller rivals T-Mobile US and Sprint in a maturing market for U.S. wireless service. 

Barclays analyst Amir Rozwadowski said, “On balance, Verizon’s Q1 results reflected our expectation that an ever intensifying competitive landscape was having an impact on the company’s operations.”  What was most surprising for what is typically a quarter characterized by high margins and low churn,” said Rozwadowski, “was the q/q and y/y increase in postpaid churn (1.15% vs. our 1.01% and last year’s 0.96%). Prior to releasing its unlimited plan, postpaid phone net losses stood at -398k. Following the release, operating metrics did improve, however,” he said. “Q1 phone total net losses of -289k were still well below our -80k estimate.”

Another unimpressed analyst, New Street Research’s Jonathan Chaplin, called the report “weak across the board.”

Chaplin said VZ was lacking in financial metrics, missing revenue, EBITDA, and EPS, and soft subscriber trends, missing on net adds, churn, and ARPU. “Through 2017 guidance remains unchanged (flat revenue and EPS on an organic basis), estimates are likely heading down,” he said.  “We continue to believe that the company needs a strategic transaction to support their wireless business for the long-term, and will look to the call for thoughts on the M&A landscape,” Chaplin said.

April 21, 2017      

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