Wednesday, April 20, 2011

Verizon Communications Inc. (NYSE: VZ): Q1 Earnings Preview 2011

Verizon Communications Inc. (NYSE: VZ) is scheduled to release first-quarter earnings before the market open on Thursday, April 21, 2011. Analysts, on average, expect the company to report earnings of 50 cents per share on revenue of $26.89 billion. In the year-ago period, the company reported earnings of 56 cents per share on revenue of $26.91 billion.

Verizon Communications Inc. provides communication services in the United States and internationally. Verizon operates in two segments: Domestic Wireless and Wireline. Its Domestic Wireless’s products and services include wireless voice and data services and equipment sales across the United States.

In the preceding fourth quarter, the New York-based company's net income was $2.64 billion or 93 cents per share, compared to $653 million or 23 cents per share in the prior-year quarter. On an adjusted basis, the company earned 54 cents per share. Total operating revenues for the quarter declined 2.6 percent to $26.40 billion from the prior-year quarter's revenue of $27.09 billion. Analysts, on average, expected the company to report earnings of 55 cents per share on revenue of $26.47 billion. 

Growing demand for smartphones has fueled recent investor confidence in companies who run the networks. During the quarter in review, Verizon oficially added the iPhone to its lineup, following months of rumors. iPhone's arrival on Verizon Wireless ended a five-year exclusive contract of Apple with AT&T (NYSE: T). The contract between Apple and Verizon Wireless is multiyear and non-exclusive. Existing Verizon customers were able to pre-order the device on February 3.  According to Verizon, iPhone was its biggest phone launch ever.

At its last earnings call in Janaury, the company said that it expects earnings growth of 5 percent to 8 percent in 2011, while revenues are expected to grow in a range of 4 percent to 8 percent. The company further said that this outlook is based on the continued growth in strategic businesses aided by Verizon's prior investments in technology; sales and recurring revenues from the newly announced Verizon iPhone and LTE wireless devices; continued growth in revenues from FiOS and strategic business services; and a stable to improving economic environment. The company also said that with the introduction of the iPhone and LTE devices, it sees smart-phone penetration rates increasing from a current 26 percent to more than 50 percent by the end of 2011. The company expects to sell 11 million iPhones this year.

During the quarter in review, Verizon's board authorized a buyback of as many as 100 million shares of the company.

The company's stock currently trades at a forward P/E  (fye Dec 31, 2012) of 14.44 and PEG ratio (5 yr expected) of 1.82. In terms of stock performance, Verizon shares have gained nearly 25 percent over the past year.

Full Disclosure: None.
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