Verizon's Price Up on Improving Financials

Verizon officials emphasized improvements in the company’s overall financial performance Tuesday, as the carrier reported Q3 earnings. Verizon lost 51,000 postpaid residential phone customers but picked up a net 151,000 business subscribers, for 100,000 total postpaid phone net adds in the quarter, above consensus estimates of 63,600. Verizon’s stock price increased sharply, closing up 9.17% for the day at $34.30.

CEO Hans Vestberg emphasized 5G and the deployment of C-band spectrum, which cost the carrier $52 billion in a 2021 auction, during a call with analysts. “We have the best networks in the market, and we will extend our lead as we complete our C-band deployment, first augmenting urban areas, and next year in suburban and rural markets,” Vestberg said: “This is our key differentiator and the center of everything we do.”

Postpaid phone levels are “stable even with our targeted pricing actions throughout the year,” Vestberg said. Verizon continues to see “muted upgrade levels, which is something we are watching carefully and is a trend we expect will continue for the next few quarters,” he said. AT&T last week reported 468,000 postpaid phone adds (see 2310190043).

Verizon added more than 400,000 broadband customers for the fourth quarter in a row, finishing Q3 with 10.3 million. The company also had 384,000 fixed wireless access adds. “Where FWA is available, our customers take it and love it,” Vestberg said. The residential postpaid phone losses were below the 85,000 lost in Q2 138,000 in Q3 2022.

Verizon reported earnings of $1.13 share for the quarter, compared with $1.17 a year ago. Total operating revenue was $33.3 billion, down 2.6% from last year. Free cash flow (FCF) year to date was $14.6 billion, an increase from $12.4 billion in 2022. Total wireless service revenue was $19.3 billion, up 2.9% year over year. Verizon now expects capital spending “at the higher end of the previously guided range of $18.25 billion to $19.25 billion.”

Verizon is delivering its “financial targets ahead of schedule on several key metrics and [is] restoring our leverage ratios to where we want them to be,” Vestberg said during the call. “We have a great network and our free cash flow generation is industry leading and we have more than 10 million broadband subscribers and that number is growing at near record rates,” he said.

Verizon is no longer the wireless industry’s “900 pound gorilla,” MoffettNathanson’s Craig Moffett told investors Tuesday. “As with AT&T last week … the real question, at least for those wondering whether Verizon can be a longer-term investment or simply a shorter-term trade, is about growth,” Moffett said: “Can Verizon grow? Well … it won’t be easy. Sustaining wireless subscriber growth will be hard in a world of slowing industry growth and increasing pressure from Cable. The same will be true for wireless” average revenue per user.

“Revenue was in-line with our estimate,” said New Street’s Jonathan Chaplin. Earnings “were a little better than expected,” he said: “FCF beat [estimates] and guidance for the year was increased by $1 [billion]. … In wireless, consumer phone adds were slightly better; business phone adds quite a bit better.”