Will Solid Wireless Traction Boost Verizon (VZ) Q1 Earnings?

Zacks Equity Research

Verizon Communications Inc. VZ is scheduled to release first-quarter 2019 results before the opening bell on Apr 23. The company is poised to witness solid traction from the impending 5G boom and is likely to record higher year-over-year revenues from the Wireless segment, which accounts for lion’s share of total revenues.

Whether this will benefit the bottom line of the company remains to be seen.

Top-Line Expansion

Verizon offers one of the most efficient wireless networks in the United States. The telecom behemoth continues to deploy the latest 5G technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investments.

Verizon has launched 5G Ultra Wideband network in select locations of Chicago and Minneapolis, ahead of schedule. As the company gears up to increase the tally of 5G Ultra Wideband mobility cities to 30 in 2019, it is offering an exclusive 5G moto mod by Motorola Solutions to power moto z3 — the world’s first 5G-enabled smartphone — to enable users to fully utilize the network features.

The 5G Ultra Wideband network hinges on three fundamental drivers to deliver the full potential of 5G technology. These are massive spectrum holdings, particularly in the millimeter wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy large numbers of small cells.

Verizon expects considerable growth in both its Wireless and Wireline businesses, going forward. The company anticipates healthy improvement in margins on the back of continued strong FiOS fiber-optic network and strategic services in the Wireline business. Also, it is looking forward to capitalize on the countless innovative technology solutions being developed in the Internet of Things and telematics ecosystem across multiple industries. Further, the company’s current focus on online content delivery, mobile video and online advertising should stoke growth.

Buoyed by such tailwinds, the Zacks Consensus Estimate for operating revenues in the Wireless segment in the to-be-reported quarter is currently pegged at $22,636 million, which is relatively higher than the year-ago reported figure of $21,900 million. The higher revenue expectations can be attributed to an uptick in demand and an upgrade to state-of-the-art infrastructure.

Total revenues for the company are expected to be $32,165 million. It generated revenues of $31,772 million in the prior-year quarter.

Other Key Factors

During the quarter, Verizon completed the acquisition of ProtectWise, Inc. for an undisclosed amount to expand its product offering and augment cybersecurity platform. At the same time, Verizon included BlackBerry Cylance’s AI-powered antivirus security solutions to its Managed Security Services portfolio to avert risks from known and unknown malwares, unwanted programs and other potential vulnerabilities. The transactions are likely to facilitate the company to build an ecosystem that enables superior endpoint-to-network visibility and eliminate threats.

Verizon has also collaborated with industry-leading web-based video playback services providers, THEO Technologies and Iris.TV, to enrich its video streaming network. The integration of the THEOplayer Universal Video Player and IRIS.TV’s Video Personalization Platform will expand capabilities of Verizon Digital Media Services to offer more personalized service to users and thwart competitive pressure.

Revenues from the Wireline segment are likely to be $7,310 million, down from $7,557 million owing to competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, and video) offerings by cable companies. In order to make Wireline profitable, Verizon is making significant investments and is streamlining its cost structure. These are likely to weigh on the company’s margins.

Our proven model conclusively shows that Verizon is likely to beat earnings in the fourth quarter as it possesses the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Verizon Communications Inc. Price and EPS Surprise

 

Verizon Communications Inc. Price and EPS Surprise | Verizon Communications Inc. Quote

Zacks Rank: Verizon has a Zacks Rank #3. This increases the predictive power of our model and a positive ESP makes us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
   
Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

CommScope Holding Company, Inc. COMM is expected to release quarterly numbers on May 7. It has an Earnings ESP of +1.89% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Juniper Networks, Inc. JNPR is scheduled to release results on Apr 25. The company has an Earnings ESP of +10.00% and has a Zacks Rank #2.

The Earnings ESP for Acacia Communications, Inc. ACIA is +5.73% and it carries a Zacks Rank of 2. The company is slated to report quarterly numbers on May 2.

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CommScope Holding Company, Inc. (COMM) : Free Stock Analysis Report
 
Juniper Networks, Inc. (JNPR) : Free Stock Analysis Report
 
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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
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