Verizon Stock Is Jumping After Earnings Beat Expectations. Why Nothing Has Changed.

On Wednesday morning, Verizon reported $1.40 successful net per share, oregon $1.37 aft adjusting for one-time costs and gains. Wall Street analysts had been forecasting adjusted net per stock of $1.30 connected average. Verizon earned an adjusted $1.18 successful the aforesaid play of 2020.

Revenue was $33.8 cardinal past quarter, up 11% twelvemonth implicit twelvemonth and astir $1 cardinal up of consensus. Verizon’s nett income was $5.9 cardinal and adjusted net earlier interest, taxes, depreciation, and amortization—or Ebitda—was $12.2 billion, astir matching analysts’ forecast.

Verizon bushed large connected the all-important subscriber beforehand successful the 2nd quarter, aft lagging down its competitors and losing customers in the archetypal 3 months of the year. The institution reported 528,000 nett caller wireless postpaid customers—meaning those who person a monthly bill—while Wall Street had been forecasting astir 360,000 connected average. For the archetypal fractional of 2021, Verizon has present added 24,000 postpaid subscribers.

Churn, oregon the percent of customers who cancel each month, was an ultralow 0.83% crossed postpaid subscribers and 0.65% for postpaid phones. Verizon got much assertive with promotions and lawsuit retention offers successful the 2nd quarter, and that showed up successful the beardown subscriber numbers. But it whitethorn person besides weighed connected Verizon’s mean gross per user, which was beneath the statement anticipation successful the quarter.

Verizon said connected Tuesday that astir 20% of its wireless telephone customers had upgraded to a 5G device. That’s not atrocious adoption for a inactive comparatively caller service. And it’s bully for Verizon’s bottommost enactment too: 5G web entree is lone disposable connected the company’s premium unlimited plans, meaning those customers request to pony up for pricier subscriptions.

Verizon’s prepaid additions were 18,000 successful the 2nd quarter, aft a summation of 19,000 successful the first.  

“While results this greeting were strong, they were expected to be, fixed that 2Q20 was the worst of the pandemic,” wrote New Street expert Jonathan Chaplin connected Wednesday. “Verizon did good successful portion successful 2020 due to the fact that switching was depressed by the pandemic, and they did good successful 2Q21 due to the fact that churn remained depressed. We deliberation they are apt to suffer stock arsenic switching comes back, peculiarly successful the backmost fractional of this year.”

Nonetheless, Verizon modestly lifted its nett and gross guidance for the afloat twelvemonth 2021. Management present expects to bring successful adjusted net per stock betwixt $5.25 and $5.35 this year, up from a scope of $5 to $5.15 previously. Wall Street’s statement estimation for the twelvemonth had been $5.10 earlier the guidance lift.

Verizon besides said Wednesday that wireless work gross maturation would beryllium 3.5% to 4% successful 2021, up from its earlier guidance of 3% plus. Management continues to expect to walk betwixt $19.5 cardinal and $21.5 cardinal successful superior expenditures this year, including $2 cardinal to $3 cardinal connected getting its instrumentality acceptable for the newly acquired C-Band spectrum.

Verizon Media, which includes ​​brands similar Yahoo, AOL, and TechCrunch, saw a betterment successful advertizing revenues from the pandemic-impacted year-ago period. Sales were $2.1 billion, up 50% from the 2nd 4th of 2020, and 13% higher than the 2nd 4th of 2019.

Verizon absorption said connected Wednesday that they expect to adjacent a brace of transactions by the extremity of the year: the $5 cardinal sale of 90% of Verizon Media and the $6.3 cardinal acquisition of prepaid-focused TracFone.

Management said that Verizon saw a 3 cent per stock boost to net from nary longer depreciating those Verizon Media assets portion they are held for sale. That was astir fractional of the company’s nett bushed successful the quarter. For the afloat year, the payment should beryllium astir 6 to 8 cents, per Verizon CFO Matt Ellis. That’s a decent information of management’s accrued nett guidance.

Verizon’s banal terms is fundamentally level since the summertime of 2018—it’s traded betwixt astir $53 and $61 for the past 3 years, adjacent including the Covid-19 carnivore market—though it has paid retired tens of billions of dollars successful dividends implicit that period. (The banal precocious yielded 4.5% annually.) It’s a unchangeable and profitable business, but the adjacent limb of maturation that absorption expects from 5G is inactive successful its aboriginal stages. Investors person shown they privation to spot the impervious successful Verizon’s numbers earlier they springiness the banal much credit.

Verizon banal was up adjacent to 2% successful premarket trading connected Wednesday, to astir $56.70. Through Tuesday’s close, shares had mislaid 2% aft dividends successful 2021, versus a 16% instrumentality for the S&P 500 and 14% for the Dow Jones Industrial Average. T-Mobile US (TMUS) banal has gained 7% this twelvemonth and AT&T (T) has returned 2% including dividends. AT&T reports connected Thursday, portion T-Mobile goes adjacent week.

Write to nicholas.jasinski@barrons.com