Top domestic wireless carrier Verizon Communications (NYSE:VZ) reported fourth-quarter earnings this morning, and the company enjoyed strong subscriber gains that helped Verizon beat the consensus estimate on revenue. As expected, Fios video connections declined as consumers continue cutting the cord in favor of over-the-top (OTT) streaming services. Here's what investors need to know about Big Red's Q4.

Verizon results: The raw numbers

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Total operating revenue

$33.95 billion

$32.3 billion

5%

Adjusted earnings per share

$0.86

$0.86

0%

Total retail wireless connections

116.3 million

114.2 million

1.8%

Retail churn

1.24%

1.34%

(10 basis points)

Retail postpaid average revenue per account (ARPA)

$135.78

$141.89

(4.3%)

Fios video subscribers

4.62 million

4.69 million

(1.6%)

Data source: Verizon.

What happened with Verizon this quarter?

Verizon remains the largest U.S. carrier, closing out the year with 116.3 million retail wireless connections, excluding wholesale connections. Verizon posted a net increase of 1.2 million retail postpaid connections in the fourth quarter, including net phone additions of 431,000. Retail churn continues to improve, declining 10 basis points during the quarter.

Illustration of 5G network connectivity over a city

Image source: Getty Images.

Here are some other notable events from the quarter:

  • Internet of Things (IoT) revenue jumped 17%, contributing to $230 million in total telematics revenue.
  • Net Fios internet connection additions were 47,000.
  • Total Fios revenue grew 2.3% to $2.96 billion.
  • Approximately 80% of Verizon's postpaid phone base is now on unsubsidized service plans, up from 67% at the end of 2016.
  • The Oath subsidiary -- which includes Verizon's media properties -- generated $2.2 billion in revenue, up 10% sequentially due to seasonal advertising trends.
  • Verizon completed its $225 million purchase of fiber-optic network assets from WideOpenWest in Chicago.
  • Capital expenditures were $2 billion.

What management had to say

"Verizon finished 2017 with great momentum, led by some of the best customer growth and loyalty results Verizon Wireless has delivered in recent years," CEO Lowell McAdam said in a statement. "In 2018 we look to drive long-term shareholder value by deploying next-generation network services, leveraging global platforms such as Oath, and using our strategic Humanability approach to turn innovative ideas into realities."

On the conference call, McAdam also added, "I can say unequivocally, there is nothing going on right now with us considering a large media play." After spending years and billions of dollars building its media business, Verizon is going to take it easy on the media acquisition front.

Looking forward

Verizon's guidance for 2018 also came in better than anticipated, with full-year revenue expected to grow by "low-single-digit percentage rates on a GAAP basis," which is slightly better than the 1% growth that analysts were modeling for. Adjusted EPS is expected to grow in the low-single-digit percentage range as well.

Like most companies, Verizon is expecting a significant benefit from the tax reform bill that was just passed, estimating that 2018 operating cash flow will get a boost of $3.5 billion to $4 billion as a result. The company says it plans on using the extra cash to strengthen its balance sheet. The tax savings should translate into a $0.55 to $0.65 increase in 2018 earnings per share, and Verizon's effective tax rate next year is expected to be in the range of 24% to 26%.

Capital expenditures for 2018 are forecast to be $17 billion to $17.8 billion, including the commercial launch of 5G. Verizon plans on rolling out 5G residential broadband in a handful of U.S. markets in the second half of the year, starting with Sacramento, California.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool has a disclosure policy.