Summary
- Verizon is set to report earnings on October 25, following a pretty bullish third quarter for the stock.
- I believe the iPhone 11 upgrade cycle will be a positive for net adds, while I see average per-account revenues continuing to improve.
- I remain bullish on this name in the long term for a number of reasons that include market share gain, high yield, and diversification features.
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Third quarter earnings season is around the corner. Verizon (VZ) will be looking to maintain share price momentum (the stock has been up 8% since the last earnings day, on August 1st) when it reports results on October 25.
The Street expects to see revenues of $32.7 billion stay largely flat over comps that started to ease in 3Q18. EPS is projected to land at $1.24, better by 4% YOY on estimated margin expansion.
Credit: Washington Post
An eye on operating metrics
As is usually the case, Verizon's operational performance will be at least as important as a topic of conversation as to whether the company delivers a revenue and earnings beat in two weeks.
Last quarter, the carrier impressed by adding about 450,000 net new consumer plus business postpaid users - for reference, peer AT&T's (T) comparable metric has hovered between roughly flat to a loss of 230,000 accounts per quarter over the past year. Meanwhile, Verizon's postpaid churn of 1.02% deteriorated by 5 bps YOY, but the increased rate seemed consistent with the competitive nature of the industry.
In 3Q19, I still expect the less aggressive marketing strategy (compared to the pricing and unlimited plan wars of 2017-2018) to cap the potential improvement in net adds and churn. But at the same time, I believe Verizon will benefit this time from a couple of bullish developments.
