Foolish Forecast: Verizon Strikes Back

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It's light speed ahead for Verizon Communications (NYSE: VZ), as the giant U.S. telecom reports earnings this coming Monday. We'll keep the ion engine idle for now, though, to get a peek at what's ahead of the company.

What analysts say:

• Buy, sell, or waffle? A total of 28 analysts offer an opinion on Verizon. Of these, 12 have a buy recommendation, 15 straddle the fence with a hold, and one suggests selling. With more than 1,225 investors rating Verizon in the Motley Fool CAPS community, the company also holds a four-star rating (out of five possible).
• Revenues. On average, analysts see revenue ticking up 2% to $23.6 billion this quarter.
• Earnings. Analysts envision earnings dropping 10% to $0.62 per share.

What management says:
Verizon is gearing up for a competitive slugfest this holiday season and beyond in a number of areas. Management responded to AT&T's (NYSE: T) move to acquire Dobson Communications with its own $2.67 billion purchase of Rural Cellular (Nasdaq: RCCC). It also launched a promised "iPhone killer" from LG that is a viable alternative to the popular Apple (Nasdaq: AAPL) device. Management is high on its success with the rollout of speedy fiber optic TV and Internet services (called FiOS), too. When reporting last quarter's earnings, CFO Doreen Toben noted that "in virtually all markets, except those in which we've just introduced the service, we reached double-digit penetration" rates for FiOS Internet service.

What management does:
When a company is spending billions to upgrade an extensive network, changes don't happen fast. While adoption of the services is going well, Verizon's margins are still weakening under the increased investments. Though stabilizing, net margins have also been clipped by restructuring charges.

Margins	3/06	6/06	9/06	12/06	3/07	6/07
Gross	63.4%	61.8%	60.8%	60.3%	60.5%	60.5%
Operating	16.9%	16.3%	15.9%	16.1%	16.5%	16.8%
Net	10%	8.8%	8.4%	7.0%	6.8%	6.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Verizon's wireless business that it operates with partner Vodafone (NYSE: VOD) is arguably the strongest in the industry. While it easily outperforms Sprint Nextel (NYSE: S) and Deutsche Telekom's (NYSE: DT) T-Mobile, AT&T holds center stage for now with the iPhone's popularity. But Verizon Wireless has belittled the damage that the iPhone has caused to its customer base, with Vodafone CEO Arun Sarin calling the churn of customers to AT&T temporary.

Investors should stack up the mobile metrics of AT&T and Verizon Wireless to see what really happened this quarter, and whether Verizon's iPhone killer has a chance of coming through for the company this holiday season.

For more telecom Foolishness:

• Will Verizon Slay the iPhone?
• ETF Teardown: The Best Wireless Stocks
• Verizon Does Double Duty