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Verizon Communications (VZ) on Tuesday reported fourth-quarter adjusted earnings that met estimates, but its 2023 earnings outlook missed. VZ stock reversed up amid expectations that more aggressive wireless promotions, mainly smartphone subsidies, will impact 2023 profit.
For the December quarter, Verizon earnings were $1.19 an adjusted share, down 10% from a year earlier, excluding items. Revenue rose 3.5% to $35.3 billion.
A year earlier, Verizon earned $1.31 a share on revenue of $34.1 billion. Analysts had projected Verizon earnings of $1.19 a share on revenue of $35.1 billion for the quarter.
Verizon said it added 217,000 postpaid wireless phone subscribers, vs. analyst estimates for a gain of 201,000, including consumer and business subscribers. Verizon added 41,000 consumer subscribers in the fourth quarter. In the September quarter, Verizon lost 89,000 consumer lines.
On the stock market today, Verizon stock rose 2% to close at 40.42. Shares initially fell on the earnings release. Heading into the Verizon earnings report, VZ stock had edged up 1.6% in 2023.
For 2023, Verizon said it expects adjusted earnings per share of $4.70, at the midpoint of guidance. Verizon did not provide a total revenue outlook. It forecast wireless service revenue growth of 3.5% vs. estimates of 2.5%.
VZ stock analysts polled by FactSet had estimated 2023 earnings at $4.96 per share with revenue edging up 1.2%.
“For context, VZ’s guidance implies that adjusted EPS will decline to levels last reported in 2018 ($4.71),” Goldman Sachs analyst Brett Feldman said in a note to clients. VZ stock has declined about 20% since Hans Vestberg took over as chief executive in August 2018.
Verizon forecast adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — in a range of $47 billion to $48.5 billion, missing estimates. Analysts had predicted growth of 1.5% to $48.7 billion.
Oppenheimer analyst Tim Horan in a note said Verizon offered “weak financial guidance.” He added: “2023 EBITDA flat with 2022, on 3.5% wireless service revenue growth but EPS down 9% on higher interest/depreciation/other expense.”
Verizon in December shook up its consumer wireless business. Further, Verizon let go of Manon Brouillette, who joined the company in June 2021 and was promoted to chief executive of the consumer business in January 2022. Vestberg took over Brouillette’s duties.
“Capital spending in 2023 is expected to drop by over $4 billion year-over-year as 5G network spending falls back, providing a clear tailwind to free cash flow,” SVB MoffettNathanson analyst Craig Moffett said in a note.
He added: “Growth metrics are uninspiring, particularly when one considers that their wireless service revenue growth guidance includes a benefit of approximately 190 basis points from the reallocation of revenue previously classified as ‘other revenue.’ “
Meanwhile, rival AT&T (T) reports fourth-quarter earnings early Wednesday. AT&T’s free-cash-flow outlook will be key, analysts say. AT&T stock lost a fraction.
Verizon stock retreated 24% last year. VZ stock holds a Relative Strength Rating of 29 out of a possible 99, according to IBD Stock Checkup.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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8:09 AM ET Wall Street analysts say 2023 free cash flow guidance will be key for AT&T stock when the telecom reports earnings…
8:09 AM ET Wall Street analysts say 2023 free cash flow guidance will…
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