Verizon Communications Inc. is set to post first-quarter results Tuesday morning amid questions about whether industry subscriber growth is slowing.
AT&T Inc.
T,
saw a smaller subscriber haul for its first quarter than it did in any quarter of 2022, though the company still reported 424,000 postpaid phone net additions for the period. Verizon
VZ,
is expected to have shed subscribers on a net basis during the first quarter, and the company’s results will provide another gauge of industry health.
Here’s what to watch for in the upcoming report.
Earnings
Earnings: Analysts tracked by FactSet expect Verizon to post $1.19 a share in adjusted earnings, down from $1.35 a share a year before. According to Estimize, which crowdsources projections from hedge funds, academics and others, the average estimate calls for $1.20 a share.
Revenue: The FactSet consensus calls for $33.57 billion in first-quarter revenue, roughly flat with the $33.56 billion in revenue that Verizon posted a year before. Those contributing to Estimize expect $33.66 billion in revenue.
Stock movement: Verizon shares have fallen after four of the company’s past five earnings reports, though they gained after the most recent one. The stock has lost 28% over the past 12 months, lagging peers AT&T (off 10%) and T-Mobile US Inc.
TMUS,
(up 14%) over the same span. The S&P 500
SPX,
is down about 3% over a 12-month span, while the Dow Jones Industrial Average
DJIA,
of which Verizon is a component, is roughly flat.
Of the 27 analysts tracked by FactSet who cover Verizon’s stock, six have buy ratings, 19 have hold ratings and two have sell ratings, with an average price target of $42.91.
What else to watch for
Verizon lost subscribers in all but one quarter of 2022, and analysts expect another quarter of declines when Verizon posts numbers Tuesday. Citi Research analyst Michael Rollins predicts a net loss of 250,000 consumer-wireless postpaid phone subscribers for the first quarter.
“While industry postpaid phone growth and the pace of upgrades could recede during 2023 (including in [the first quarter on a year-over-year] basis), we expect the competitive environment and promotional costs to weigh on Verizon’s [key performance indicators] and financials over the course of the year,” he wrote.
Evercore ISI’s Vijay Jayant anticipates a net loss of 270,000 subscribers within the consumer postpaid phone segment, reflecting “continued challenges” and “a reversal from the modest gains” seen in the fourth quarter.
On a year-over-year basis, he’s predicting higher gross additions but a 5-basis-point increase in monthly churn.
Of interest to investors is whether Verizon’s strategy and execution is changing in its consumer wireless business now that Sowmyanarayan Sampath, who formerly led the company’s business group, is heading the unit after a series of March executive changes.
Read: Verizon is at the start of a new chapter, but will the story be any different?
Verizon “is slowly turning around its consumer business to stabilize market share, which will likely take another one to two years, but we should see some positive signs this quarter,” Oppenheimer’s Timothy Horan wrote. He thinks Verizon has “the right strategy with new leadership, converged mobile and broadband offering, segmented go-to-market, a greatly improving network and fixed wireless.”
In Horan’s view, Verizon initiatives like mix-and-match plans and a more segmented go-to-market strategy “are improving store traffic and stepups with 45% of the base on a premium unlimited plan in [the fourth quarter of 2022], up from 41% previous quarter,” though he sees minimal room for additional growth in average revenue per user.
