Source: PaxForex Premium Analytics Portal, Fundamental Insight
Verizon Communications, one of the largest telecommunications companies in the US, recently released its third-quarter earnings report for 2024, revealing a mixed performance. Operating revenue remained largely unchanged at $33.33 billion, slightly down from $33.34 billion in 2023, while adjusted earnings per share (EPS) decreased to $1.19 from $1.22. This reflects tighter profit margins and increased pressures on profitability, especially as net income declined significantly, dropping to $3.41 billion from $4.88 billion in the same period last year.
Despite some financial headwinds, Verizon’s wireless segment showed resilience. Wireless service revenue grew by 2.7%, reaching $19.8 billion, an indicator of growing consumer demand for reliable and high-quality wireless services. This sector's performance is critical to Verizon’s long-term strategy, particularly as the company continues to invest heavily in expanding its 5G network and enhancing coverage.
One notable strategic decision was Verizon's move to sell 6,339 wireless towers to Vertical Bridge, a communications infrastructure specialist, in a leaseback deal worth $3.3 billion. This sale will provide Verizon with the liquidity needed to reinvest in its core business operations, especially in 5G development. Despite selling these assets, Verizon retains access to the infrastructure, ensuring that it can continue expanding and upgrading its network capabilities to meet consumer demands.
As 5G adoption grows across the US, Verizon’s ability to leverage its network to deliver faster, more reliable services could be key to maintaining its competitive edge. This move also allows the company to focus its resources on improving customer experience and boosting its technological edge.
Verizon’s Business segment continues to face challenges, with a 2.3% year-over-year revenue decline, totaling $7.4 billion in Q3 2024. This drop highlights competitive pressures and changing demand in the business telecommunications sector, where many companies are adjusting their needs in response to digital transformation trends. Verizon’s performance in this sector may be further impacted by the broader economic environment and shifting corporate priorities.
To address these challenges and improve overall operational efficiency, Verizon has initiated restructuring efforts, resulting in a $1.7 billion severance charge. This restructuring is aimed at streamlining the company’s operations to better compete in a highly competitive industry. While this cost weighed on operating income for the quarter, the restructuring is expected to yield long-term benefits, positioning Verizon for more sustainable growth in the future.
In terms of customer retention, Verizon has managed to maintain a stable postpaid phone churn rate at 0.89%. Postpaid churn is a critical metric for telecom companies, as it reflects customer loyalty and the effectiveness of retention strategies. Verizon's ability to maintain low churn levels, even amid rising competition and price adjustments, indicates the strength of its network and services.
The company also reported adding 239,000 new retail postpaid phone connections during the quarter, a sign of successful acquisition strategies and growing consumer interest in Verizon’s offerings. As wireless connectivity becomes even more integral to daily life, Verizon's focus on providing reliable, high-quality service helps the company retain existing customers while attracting new ones.
Looking forward, Verizon has provided its projections for the remainder of 2024, offering a more optimistic view despite the current challenges. The company expects wireless service revenue to grow between 2.0% and 3.5%, reflecting continued demand for connectivity services. Additionally, Verizon is forecasting adjusted EBITDA growth in the range of 1.0% to 3.0%, a sign that the company anticipates stabilizing profitability in the coming quarters.
To support these growth projections, Verizon has earmarked capital expenditures of $17.0 billion to $17.5 billion, with a focus on expanding its 5G and fiber network capabilities. These investments are crucial for maintaining Verizon's reputation for having one of the most reliable networks in the country. As more customers seek faster and more dependable wireless service, Verizon’s continued expansion of 5G and fiber infrastructure will be pivotal in maintaining customer satisfaction and expanding market share.
Investors will be closely monitoring Verizon's ability to execute on its strategic goals, particularly as the telecom industry continues to evolve. The company’s focus on expanding its 5G network, improving operational efficiency, and retaining customers through superior service will be essential in driving future growth. However, the challenges in the Business segment and the ongoing restructuring efforts highlight potential risks that could impact profitability.
As the telecommunications landscape becomes more competitive and consumer expectations for speed and reliability increase, Verizon’s ability to innovate and adapt will play a key role in its long-term success. The company’s strong network infrastructure, coupled with its ongoing investments in 5G and fiber, positions it well for the future, but effective cost management and strategic execution will be vital in overcoming the pressures it currently faces.
Verizon’s performance in the upcoming quarters will provide a clearer picture of its ability to balance short-term financial challenges with long-term growth opportunities, making it an important stock for investors to watch closely.
As long as the price is above 40.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 41.78
- Take Profit 1: 44.00
- Take Profit 2: 46.00
Alternative scenario:
If the level of 40.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 40.00
- Take Profit 1: 38.00
- Take Profit 2: 36.00
