Yahoo Finance Will Soft Consumer Revenues Hurt Verizon (VZ) Q3 Earnings?
Verizon Communications Inc. VZ is scheduled to report third-quarter 2023 results before the opening bell on Oct 24. In the quarter, the Consumer segment is likely to have recorded year-over-year lower revenues despite a healthy momentum in the wireless business, owing to a challenging macroeconomic environment.
Factors at Play
The Consumer segment includes the retail wireline and wireless businesses.
Verizon got full access to the 5G C-band spectrum that enabled customers to use a full 160 MHz of spectrum, nearly tripling the 5G bandwidth connectivity. This further helped the company to expand and enhance its 5G Ultra Wideband network, offering greater capacity to accommodate more customers with robust services and higher data speeds. The additional spectrum also enabled Verizon to offer 5G Home broadband and Business Internet services to more customers. These are likely to be reflected in the upcoming quarterly results.
During the quarter, Verizon successfully completed data and voice sessions over its 5G network using Ericsson's new RedCap-compatible software and MediaTek’s RedCap testing platform. The technology offers an ideal solution for lower-complexity and lower-cost NR devices such as consumer wearables, fitness trackers and mobile medical devices. It also paves the way for enterprise IoT solutions like video surveillance, industrial sensors and smart grids to run more efficiently on Verizon’s 5G network.
In the quarter, the company introduced ‘Verizon Internet Gateway,’ an innovative technology that combines an advanced modem and router into a single unit for superior connectivity to Home Internet users. With its user-friendly features, it simplifies both the installation and day-to-day usage of the device and is available for new 5G Home Internet customers at no additional costs.
Verizon offers various mix-and-match pricing in wireless and home broadband plans that have historically led to increased adoption of 5G devices and premium unlimited plans. Although this is likely to have translated into healthy customer additions, revenues from the Consumer segment are likely to have taken a toll.
Our estimate for revenues from the Consumer segment is pegged at $24,008 million, down from $25,840 recorded in third-quarter 2022. Our estimate for operating income from the segment stands at $7,237 million, suggesting a fall from $7,349 million.
Adverse foreign currency translations and high operating costs are likely to have led to soft margins in the third quarter. Verizon is also expected to have recorded high capital expenditures for the launch and continued build-out of its 5G Ultra-Wideband network, deployment of significant fiber assets across the country and upgrade to Intelligent Edge Network architecture.
The company’s wireline division is also struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. Due to challenging macroeconomic conditions and high inflationary pressures, several customers are likely to have faltered on their monthly bill payments, further affecting the quarterly performance.
Overall Expectations
For the September quarter, the Zacks Consensus Estimate for revenues is pegged at $33,390 million. It reported revenues of $34,241 million in the year-ago quarter. The consensus estimate for adjusted earnings per share stands at $1.17, which suggests a decline from the year-ago tally of $1.32.
Earnings Whispers
Our proven model does not predict an earnings beat for Verizon for the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.38%. 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-eps-surprise | Verizon Communications Inc. Quote
Zacks Rank: Verizon has a Zacks Rank #4 (Sell).
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Intel Corporation INTC is set to release quarterly numbers on Oct 26. It has an Earnings ESP of +12.98% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Silicon Motion Technology Corporation SIMO is +3.00% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Nov 1.
The Earnings ESP for Meta Platforms, Inc. META is +3.98% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct 25.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Intel Corporation (INTC) : Free Stock Analysis Report
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